Mon, 23 February 2009
Home ownership has long been a large part of the American dream. Through the course of the 20th century, the percentage of Americans owning their homes rose considerably. In many of these homes three generations lived under one roof. Today, there still are many 3 generations homes. The reasons for it are the same. The grandparents often help care for their grandchildren while the parents are working. Sometimes the grandparents need assistance and can’t live alone any longer. There is, however, a big difference between the households of the 20th century and those of the 21st century, which generation owns the home. The parent homeowner of the 20th century now is the grandparent homeowner of the 21st century. Well, not so fast. If Jim doesn’t pay fair market value for the home then the uncompensated amount is treated as a transfer for less than fair value should Joe need Medicaid benefits in the next five years to pay for long term care. Provided these contingencies are covered, however, the home transfer can work well. What happens, however, if Joe is not healthy when contemplating a transfer, but instead has dementia and already needs some care. In that case, the home transfer is a little more complicated but I’ll address that in the next week’s post.
Category:Long term care planning
-- posted at: 6:00am EDT
|
Mon, 16 February 2009
So, in last week’s blog I presented a common scenario, Mom and Dad both needing long term care and nothing but a house left in their names. The children are paying for their care to the tune of $10,000 per month. We get Dad on Medicaid first. Now we work on getting Mom into a nursing home and then apply for Medicaid for her. The home will have to be sold (unless there is a family member living there but we’ll address that exception in another issue) but it won’t hold up Mom’s Medicaid, which is important, since it not so easy these days to sell in a what is a down market. Once the home is sold Mom will lose her eligibility for Medicaid and will need to private pay from the proceeds of the sale. She also could keep her Medicaid eligibility and pay the proceeds to the State to reimburse it for benefits paid up till that point. Which option is better depends on how much is realized from the sale and how much is owed to the State. But, keep in mind that the State pays the nursing home at a lower rate than you or I would pay (approximately 50% less). And, what about the money that the children paid out of their own pocket for Mom and Dad’s care? They can be reimbursed from the proceeds once they sell the house. However, everything must be documented because Medicaid presumes that transfers between family members are gifts, not loans. If it is a loan then there must be a written agreement. The best practice is for there to be a recorded mortgage. At the closing the mortgage is paid off and a discharge is recorded by the Buyer’s attorney. The children are reimbursed directly and there is a record as far as Medicaid is concerned. In the end, the parents are paying for their care from their own assets, the children are paid back (money which they will need for their own retirement and long term care needs) and depending on how much long term care is needed and what the home sells for, there may even be some amount left to transfer to the next generation in the form of an inheritance, after the State is reimbursed for benefits they paid out on Mom and Dad’s behalf.
Category:Medicaid
-- posted at: 6:00am EDT
|
Mon, 9 February 2009
Mom and Dad are still living in their home which they own. They both need round the clock nursing home level care and have home health aides living with them. This has been going on for a number of years and they have spent down all their assets on care and maintaining the home. Now the children are spending their own money, in some cases as much as $10,000 per month or more, with no end in sight. They want to sell the home but in today’s economy and real estate market that isn’t as easy as it once was. Their current predicament is taxing on the family, both financially and emotionally. Last week I talked about a reverse mortgage as a possible solution. Is there any other way out?
Actually, there is. There is a way to move both parents into a nursing home, get them on Medicaid and reimburse the children for monies they paid for their parents’ care. Medicaid rules are very complex and the timing of each step in the process is critical but it can be done. Here’s how it works.
The first step is to get one of the parents into a nursing home. Let’s say it is Dad. If he is in the hospital already (often the case when we get the call) then he should be transferred from there to the nursing home. We then apply for Medicaid. The house is an exempt asset (ie. not a countable asset for Medicaid eligibility purposes) since Mom is still living there. Once we get Dad approved for Medicaid there is what is called a “division of assets”. Whatever is Mom’s is now hers, to be spent on her care but not on Dad’s. This is the key. In next week’s blog I’ll discuss the next step, getting Mom on Medicaid.
Category:Medicaid
-- posted at: 6:00am EDT
|
Thu, 5 February 2009
So after listening to
Show 13 you’re thinking, we should have taken action
immediately after Dad’s diagnosis but didn’t so now what
do we do? In the 14th installment of his audio podcast,
Yale Hauptman discusses just that scenario, crisis planning.
Although the picture is more complicated all hope is not lost.
Yale discusses some of the options still available to families, but
timing is a key. Be sure to tune in for a concise 10 minute discussion of Medicaid crisis planning that will give you an overview of what still is possible, even if you have failed to early action, but time is running out. To subscribe to our podcasts click here Please send us your feedback |
Mon, 2 February 2009
Mom and Dad are living in their home but their health is failing. They do not yet need nursing home level care, but do need some assistance on a daily basis. Their children are running back and forth helping to provide care but it is just too difficult to do on a long term basis. The plan is to move them to an assisted living facility. The problem, however, is that they have limited funds to pay for that care. While they intend to sell the home, that won’t happen overnight. An option that has worked well in the past is to take a home equity line of credit and use it to pay the monthly assisted living fee and real estate taxes, insurance and maintenance until the home is sold. Except, in today’s economy with the financial industry itself being bailed out, banks are no longer approving these loans, concerned about the creditworthiness of borrowers and the risk of default. So what now? It may be time to look at a reverse mortgage. Increasingly, this is the only option for seniors. The concern about defaulting loans is not an issue because, by its terms, a reverse mortgage won’t be repaid until the borrower dies or sells the home. The ability of the borrower to repay isn’t a factor because he/she makes no monthly payments. Hence the term “reverse”. Over the years I have seen many cases where reverse mortgages have enabled seniors to stay in homes they really couldn’t afford any longer and probably should have sold. If they outlive the funds borrowed, typically they are in poor health and now have exhausted their assets completely. It is also true that these loans carry higher transactional fees than traditional mortgages. However, here, the plan is to sell the home as soon as possible to pay for the next level of care, not hang on too long. And, if a traditional mortgage isn’t an option any longer, the higher fees become acceptable given the alternative of the children taking money from their own savings to pay the cost of Mom and Dad’s care. With an economy in recession and unemployment rates at their highest in a generation many children don’t have the funds to pay for their parents’ long term care. That’s why for many, it may be time to take a closer look at the reverse mortgage.
Category:Long term care planning
-- posted at: 6:00am EDT
|