Managing Your Home While Planning for MassHealth

What will happen to your home if the day comes when you need to move to a nursing home? If MassHealth covers your long-term care, it won’t take your home and force you out, but the program may take profits from its sale – profits that your beneficiaries are counting on. The best way to make sure that your home and loved ones are protected when that day comes is to make plans long before it arrives.

MassHealth and Your Home

MassHealth is fundamentally a welfare program, and it spends a disproportionate amount of its funds on providing long-term care for the members who need it. Because of that burden, MassHealth is allowed to recover some of its costs from members, which it does in part by placing living liens on houses still owned by members who reside in long-term care facilities. If the house is sold while the member is still alive and certain other conditions are met, MassHealth is entitled to a portion of the profits, up to the cost of the member’s care.

Options for Managing Your Home

For many Massachusetts homeowners looking ahead to their long-term care needs, irrevocable trusts are important tools. Assets held in a Medicaid-compliant irrevocable trust are off-limits to MassHealth. Using this option gives you the security of knowing that you can continue to live in your house for as long as possible, and can then choose what to do with it should you ultimately need long-term care. What’s challenging about placing your home in a trust for this purpose is that it requires advance planning. MassHealth’s five-year lookback period applies, so the home has to be put in the trust at least five years before the owner applies for MassHealth benefits. 

Transferring the home to a trust isn’t the only way to protect its profits, should you decide to sell during your lifetime. It’s important to understand the conditions under which MassHealth will place a living lien. If the member is expected to return to the home within six months, or if a protected relative currently lives in the home, MassHealth will not place a living lien on the property. Protected relatives are spouses, children under 21, blind or permanently disabled children of any age, and siblings who have legal interest in the property.

Something called a life estate clause might be a useful part of your estate planning strategy, too. A life estate is an arrangement that gives the homeowner the right to live in the house until their death, at which point the property is transferred to pre-determined beneficiaries. Homeowners often use this strategy to pass their homes onto their children. A life estate clause can be added to a deed, so it’s easier to establish than an irrevocable trust. Like a trust, a life estate is subject to MassHealth’s five-year lookback period. It has to be established at least five years before you apply for long-term benefits through MassHealth.

All that said, transferring your home to a trust is not necessarily your only way to keep from forfeiting its value to MassHealth. For example, some homeowners decide to gift their homes outright to family members. MassHealth has no claim to a member’s property if it no longer belongs to the member. This strategy has some significant downsides including major gift tax implications.

Things to Think About

When you’re making plans for managing your home in the coming years, think specifically about how you’ll pay for its care. You may be responsible for certain expenses if the home remains your property after you’ve moved into a long-term care facility. Unavoidable costs might include taxes, maintenance costs and homeowners insurance, among others. Keeping money in your bank account to pay for those costs isn’t an option under MassHealth’s asset limits.

Again, you may be able to use assets held in a trust to cover costs associated with maintaining your home. How and if this works depends on how the trust is written, which is why it’s important to consider all the fixed costs associated with owning and maintaining the home long before you need to move into long-term care. Making sure the trust is written carefully, and that you understand its rules and limitations, is absolutely critical. MassHealth will assess whether or not the home counts as an asset. Treating the home like it’s still in your control, like by paying for repairs out of pocket, may breach the “protection seal” of the trust.

Even if you don’t place the home in a trust, you may still need to plan for how you’ll manage its expenses in coming years. This varies case by case, so it’s something best discussed with attorneys specializing in estate planning.

Making decisions about managing your home can be one of the most confusing and emotionally fraught parts of the estate planning process, especially when you want to be MassHealth eligible. You have a number of options, each with its own advantages and challenges, and there’s a lot of nuance involved in creating the structures that will best preserve your home and any profits from its eventual sale. The team at the Ladimer Law Office is here to help. Contact us today.