A Two Generation Family Long Term Care Crisis – Part 2
So, in last weekâs 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 weâll address that exception in another issue) but it wonât hold up Momâs 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 Dadâs 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 Buyerâs 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 Dadâs behalf.