Mom and Dad transferred house to me in 1994 and we subsequently set up (on the deed) a life estate for them. The house is in New York State. Mom died about 10 years ago. dad is now in a nursing facility. He has in assets less than $10K. I am trying to determine if I sell the house now (while he is still alive) does Medicaid have an equity interest in the house?

Would a Transfer Upon Death protect the Medicaid recipient's home from being targeted for sale following the recipient's death? If so, when does that need to be filed - during the recipient's lifetime or after their death?

Anna - Obamacare/Affordable Care Act is not responsible for having MERP - Medicaid Estate Recovery - done for those over 55. This is instead due to DRA - Deficit Reduction Act of 2005 - Bush era.

Medicaid is a joint federal & state program: managed by the state but within an overall federal guideline. Since 1993, the feds have had it such that all states need to have a recovery or recoup program for those getting Medicaid over 55 and not just for long-term care (NH) situations but for a whole range of Medicaid paid for programs, like mental health facilities, community based care programs, etc. Medicaid for those over 55 (as opposed to children/CHIP or mom's/WIC) is almost always an long term situation so costs are huge and continuous. Enforcement of any recoup was lackluster by the states; most states did little to no recovery at all.

When the DR signed into law by Bush in 2005, it required that the states ALL have a active recoup aka MERP of any available assets from those on Medicaid or their estates if over 55. DRA 2005 also allowed for states to have more flexibility in their management of Medicaid $'s.

DRA did a lot of things to change Medicaid: codifying the look-back period; changes to transfer of asset rules; transfer penalty imposed; availability of HCBS waivers; required attempt of recoup of payments. DRA since it is federal, had to be enacted by all the states in whatever legal system a state has for this. Some states did DRA in 2006 while other states dragged it out to 2010. All states are under Bush era DRA law now. Not Obama but Bush. Now ACA did expand NH availability to those considered "MAGI" (under 65, not disabled, no Medicare) to be able to get Medicaid funding for their NH care if deemed "medically frail". MAGI's medically frail do not have to do a resource test like over 65 Medicaid applicants.

The ability for recovery of Medicaid assets has always been an option under federal law for Medicaid since the 1990's. What is happening now and why MERP is coming on folks radar now, IMHO, is that the states are more & more outsourcing the MERP process. DRA allows the state to have more decisions as to how Medicaid is done. BTW the more Republican red-states are more going with outside contractors for MERP. 2 main companies doing this - HMS & PCG - and very very proactive in process. Their approach is more akin to a collection agency so very time-line driven and heavy on requiring documents for exemptions or exclusions. They get a % of the recovery. A very different approach than having a state employee on straight salary do a recovery.

Medicaid is an "at-need" entitlement that you apply for so if you go that route, the rules are what they are. Medicaid is not like SS or Medicare that you have been paying into.

If you want to keep your parents home, either never apply for Medicaid; or do long range planning (get Heisers book if you don't understand what this means) OR look carefully at the MERP exemptions and exclusions for your state and how your states probate laws work to see what options are for your situation and do whatever to have those work to get a release of MERPs claim or lien in accordance with your state laws on probate &/or MERP rules. Again DRA 2005 was Bush era not Obama.

What about spouse signing over their half of house to spouse. Can they then be eligible for Medicaid with no consequences?

This article does not include info on obamacare/expanded medicaid system where states can now put liens on assets of people 55 to 64 who are on expanded medicaid whether they actually use medicaid services or not to the tune of approx $625 per day, collectible later in life but what a damper on homeownership.

Questshop...Yes, I have an accountant and I am going to make an appt with him shortly. I purchase the book "How to protect your family's assets and will read that also. As for the attorney, I was told not to put the house (which was given to me) in the Trust. I don't know why. So, it is not mentioned in the Trust but house is now in my name. I also read where I have to report this gift in the year it was given to the IRS. Once the house was signed over to me, his assets were diminished greatly. I would say the balance is about 75,000 in addl assets. I guess I can only pray that he dies at home. He does not want to go to a nursing home and I just thought we would have enough money to pay for a home health aid (or nurse)to help me. They are not inexpensive.

I had no idea how much work this was going to mean.

OG, the $73K would be the value of the gift, not the tax due on it. Typically gift tax is due on the amount above the annual exclusion set by law (see irs.gov website for 2015 value). The gift tax is paid by person giving the gift, and it will be held against your partner if he applies for Medicaid within 5 year lookback. I think you mentioned that you have an elder lawyer, who probably has a CPA or tax professional on staff. They would be able to advise you about this kind of large asset transfer given that you are partners, not spouses, and that changes the way estates/property transfers are treated. You might not think Medicaid would be involved now, but one can never be sure what the future holds.

Great Article and is explained very well. However, My partner is 88 and I cannot imagine in his health that he will be around another 5 years. If he gifts me the house now, would the tax change? He paid $135,000 for the home and with the downturn in our market, the home cannot sell for more than MAYBE $120,000. So value X .56341 = 73243.3 That seems like a lot of tax for this small amount. Did I do something wrong? Is that 7 thousand or 7 Hundred... I you can help answer what would be the best way to handle this, I would be greatly appreciative.

As always terrific information from Heiser. The legalities & MERP recoup are considerations. But family need to also really consider if keeping "maw-maw's" house is financially feasible for them once maw-maw's goes into a NH & her funds are almost completely required to be her Medicaid required co-pay. Family need to clearly take a hard look at all the costs on the home and if feasible for their wallet for however long their elder is alive. To me, whether house is in LE,"Ladybird Deed", or caregiver MERP exemption mode, if the $ isn't there to maintain the house, all the planning doesn't matter.

If you afford 2nd or 3rd home, then dealing with maw's house is probably not a budget buster. But what seems to happen is family is all "govmint not gonna take maws house" at the beginning but realistically cannot afford home so @ year #2 when taxes & insurance come due & some family are over cutting the grass (or whatever they promised to do)....that the house ends up getting sold.

Is there a similar provision for a surviving spouse?

In these type of articles explaining legal matters, please stress that every State has different rules and people should check with an attorney in their State. For instance, in Maine we do not utilize life estates; instead we do "life tenancy agreements" based on Maine's regs. Also, in Maine the exemption is $2000 but also an additional $8000 in liquid assets. Thank you, RK, attorney in Maine

With the "cost recovery" programs of Medicaid, if the adult child of the parent is the POA and it is in the will of the surviving parent to pass on the property to that child, instead of waiting for the death of the parent and going through probate and that parent is NOT in a nursing home but is in their own home and receive in home care can the POA be added onto the deed of the property and "share" that property until their parents death, and then the property would not go through probate?