Current studies have shown that 76% of Americans will require some form of long-term care be it nursing home, assisted living or home care. The cost of this care can range from $20 per hour or more for home care to $12,000 per month for nursing home care.
Paying for that care means most people [78%] will rely on a Medicaid program. Medicaid has become the long term care insurance for the middle class.
However, Medicaid programs have strict financial guidelines.
If a single person applies for Medicaid to pay for this care, the Medicaid agency will require that the home be sold and that the proceeds of sale be used to finance the care before they will be eligible for medicaid benefits.
If a Medicaid applicant is married and owns a home with his or her spouse, then upon death of the Medicaid recipient a lien will be placed upon the home to repay Medicaid for the medical assistance paid on behalf of the deceased Medicaid recipient.
Then how is it possible to protect my home and still qualify for Medicaid?
Medicaid programs have a 60 month look-back period. This "look back" examines all financial transaction of the applicant and spouse [if applicable] for the 60 months prior to the application date.
Transfers prior to this period are "protected", that's why Pre-Planning with a Medicaid specialist is imperative.
Most people who transfer their home want to transfer it to their children, wait the five years, and then have the home protected from Medicaid. NOT A GOOD IDEA.... for several reasons. Which include:
- Risk factors. If a home is transferred to a child, the home could be lost, in whole or in part, if:
- the child has creditors who sue the child;
- the child winds up in a divorce;
- the child passes away before the parent; or
- the child is on public benefits and the transfer may cause the child to lose those benefits.
- Capital gains tax. If a home is transferred to children, the parent’s $250,000 exemption for singles or $500,000 exemption for married couples will be lost. By transferring to a properly-drafted Medicaid Asset Protection Trust, this benefit can be preserved. The child will then have to pay this capital gains tax which for most people, is approximately 25% [federal and state taxes].
- Step up in basis. If a home is transferred to a properly-drafted trust, the children will receive a step up in basis on the parent’s death and little or no tax will be due upon sale of the property.
- State real estate tax benefits. In Delaware there are a number of real estate tax benefits attendant to ownership of a primary residence. These include a homestead tax rebate, senior citizen’s deduction, veteran’s deduction, veteran’s exemption for disabled veterans, and a tax freeze. If the home is transferred to a trust with a properly-drafted deed, these benefits can be preserved.
Contact us today to protect your home and other assets from Nursing homes and Medicaid in Delaware.
Paul Lorrah is a Medicaid specialist and author if such books as "How to get Medicaid to pay your long term care costs" and "Planning and paying for long term care".