Protect Your Parent’s House from Being Sold to Pay Back Medicaid
When parents who were in an assisted living facility being paid for in part or in whole by Medicaid passes on, Medicaid may try to do what is called an estate recovery. Unless you and your parents take preventative measures before signing up for Medicaid, then you will find that Medicaid may have the right to seize all of your parent’s assets and liquidate them to pay for the costs of their care. Unless you do something to prevent it, this recovery of assets will include your parent’s house. But there is something you can do.
Using a Life Estate
A life estate is a legal arrangement you and your parents can use to allow your parents to retain ownership of their home while they are alive, and then allow you to assume ownership after they have passed on. If your parent’s home is the home you grew up in, then this is how you would keep your childhood home in the family after your parents have passed away. When Medicaid comes to seize and liquidate the home, they will not be able to do so.
How Does it Work?
A life estate allows your parents to transfer partial ownership of their home to you and your siblings, if you have any. While your parents are alive, they have the legal right to live in the home, rent it out, or allow you to live in it. But as long as your parents are alive, they are the only ones who can reside in the home.
While your parents are alive, a life estate allows you and your siblings to have partial ownership in the property. The only condition is that you cannot fully possess the property until your parents pass away. Once your parents pass away, ownership and possession of the property automatically transfers to you and your siblings.
Things to Consider
A life estate is a real estate transfer from your parents to you. Under Medicaid rules, any real estate transfer made in the five years before submitting a Medicaid application will trigger five years of ineligibility for Medicaid benefits. To avoid the five-year penalty, your parents must reside in the property for at least one year after signing the life estate and before applying for Medicaid benefits.
If your parent’s real estate is worth a considerable sum of money, then the execution of the life estate could trigger Florida or federal estate taxes. This is something that you should discuss with a Medicaid Planning attorney before finalizing your life estate. Your parent’s home is important to you and your family. Our experienced attorneys understand your concerns, and we are ready to discuss the benefits and challenges of a life estate with you to help you have peace of mind.