Additional Benefits for a Single Individual Owning Home Jointly with a Protected Transferee

Additional Benefits for a Single Individual Owning Home
Jointly with a Protected Transferee

Medicaid planning must consider three interrelated goals: to establish Medicaid eligibility, to avoid disqualification after eligibility and to avoid the Medicaid lien after the death of a recipient of benefits. The discussion in Post 6 relating to a child who “resided” in the home for at least two years prior to institutionalization and provided care which permitted the individual to reside at home rather than go in a nursing home addresses mainly the issue of Medicaid eligibility. The prior post involved related to the transfer of the home to a “protected transferee” and that addressed mainly the issue of Medicaid eligibility. However, the planning issues involved when there is joint ownership by the parent and the child relate to the disqualification of Medicaid after eligibility and avoiding the Medicaid lien. For purposes of this discussion, joint ownership shall refer to a joint tenancy with right of survivorship (i.e., property passes to the survivor upon the death of the first of parent or child).

A. Assuming the requirements of eligibility are met, joint ownership of applicant’s residence with a child who is a protected transferee (or even a child who is not a protected transferee) will not preclude eligibility. N.J.A.C. 10:71-4.4(b)6. treats real property which cannot be sold because of the refusal of a co-owner to liquidate as an inaccessible resource.

B. However, disqualification from eligibility and the Medicaid lien are avoided by a transfer of applicant’s joint interest to a “protected transferee” child.

1. The Medicaid lien is avoided by terminating ownership, and, thereby removing the property from a Medicaid recipient’s “estate.” That is, assets that are part of one’s estate after the individual dies and receives Medicaid are subject to the Medicaid lien. It is noted that the lien statute expressly applies to joint tenancies.

2. Assuming the child disinherits the transferor parent, the problem of inadvertent disqualification is eliminated (joint ownership, child dies first and property passes to parent by operation of law).

3. If both individuals are alive and joint ownership were not terminated and the parent had qualified for Medicaid, a sale of the property would result in one-half the net proceeds being allocated to the parent with subsequent loss of eligibility.

Note: Another category of protected transferee is a (i) sibling who has an equity interest in the home; and (ii) who was residing in the home for at least one year prior to the date of institutionalization. The situation usually arises when sibling is joint owner of a two-family dwelling. The need to avoid the Medicaid lien is not as compelling in this situation as in the circumstances of joint ownership with a child.

Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.


© April 2009, Post #23

In Determining Eligibility, All Rules Must Be Considered

In Determining Eligibility, All Rules Must Be Considered

I recently had a fact situation which required an understanding of several similar rules, only one of which applied.

Facts: Medicaid applicant lived with his disabled sister through the time of application. Applicant had discussed Medicaid eligibility with several attorneys and was advised that the house had to be sold. The sections reviewed by the attorneys and determined to be non-applicable include:

1. The exemption for transfers to a disabled child (Post 42). Child clearly relates to a child of the applicant and would not apply to his sister.

2. Post 6 refers to property owned by applicant residing with caretaker child. Such a caretaker child for purposes of these articles has been referred to a “protected transferee.” Another category of protected transferee is a sibling who has an equity interest in the home and who is residing in the home for at least one year prior to institutionalization. This alternative was also reviewed, but is not applicable since the sibling did not have an interest in the home. Creating an interest in the home for purposes of compliance with the statute would not work since this would result in a transfer. Generally, a sibling has an interest in a home with an applicant either through inheritance or purchase rather than a transfer by the applicant to the sibling of a partial interest.

The client and family discussed the above with me and were of the opinion that within a reasonable time after institutionalization, the house would have to be sold and the individual would have to use the proceeds on nursing home costs. I discussed with them Post 14 which is designated “The Significance of Dependent Relative Residing in the Home with Applicant.” That is, the person in the home was neither a disabled child nor a sister with an equity interest, but the home was still exempt based upon Program Instruction No. 85-8-9, an old Medicaid communication, which requires dependents of a relative rather than the issues perused.

The importance of this situation is that all possibilities must be considered in advising a client regarding eligibility and that many occasions require authority not normally needed in the Medicaid eligibility process. Creativity is especially necessary when dealing with the home. With respect to the home and real property, see Posts 6, 11, 14, 32, 34, 35, 36, 37, 38, 41, 42, and 52.


Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.


© April 2009, Post #22

Inadvertent Disqualification of Individual Due to Death of Another

Inadvertent Disqualification of Individual Due to Death of Another

As indicated in Post No. 4, a Medicaid recipient’s resources on the first of any month after Medicaid must not exceed the resource limitation of $2,000 or $4,000.

The prior death of a relative of a Medicaid recipient could result in the loss of eligibility. The estate plans of individuals of a Medicaid recipient are often a neglected consideration. Such concerns can even arise when an individual has been part of the Medicaid planning process, such as a “protected transferee,” a disabled child or a donee of gifts.

For example, if the home is transferred to an exempt individual, major concern is that the will of the transferee not devise the home to the potential Medicaid recipient or that the potential Medicaid recipient not receive a share of the estate of the transferee by intestacy.

It is important that a Medicaid recipient not be a beneficiary under any will. Therefore, the wills of other relatives, whether or not a participant in the Medicaid planning process, should be reviewed. Generally, ethical considerations will dictate that such individuals retain separate counsel.

Inheritance by intestacy could also result in disqualification, see N.J.S.A. 3B:5-3, 4.

The receipt of nonprobate assets such as insurance proceeds or retirement benefits could also cause disqualification.

With respect to life insurance, if an owner designates a primary beneficiary without contingent beneficiaries, the policy could provide that the insurance would go to the Medicaid recipient. Therefore, beneficiary designations should be carefully reviewed.

The topic of the will of the “healthy spouse” is complicated and has been purposely neglected. Reference is made to my article Practical Medicaid Planning – Part II, 1999 “Estate Planning Issues,” by Levin, Mark.



Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.


© April 2009, Post #21