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Preserving The Family Home – Part I Keystone Elder Law – Mechanicsburg, PA

What happens to the family home when an elderly loved one needs long-term care in a facility?  This issue has obvious financial implications, but may have strong emotions attached to it as well.  In our rural communities, it may not be just about a house, but instead may involve livelihoods, for example, adult children who are working on the family farm. A variety of questions may arise when long-term care is needed. Does a house/property need to be sold to pay for care?  Can a family home be preserved for a child or children without payment?  Can an older person own a home while living in a nursing home? Let’s consider some of these situations.

We frequently have had clients who, in their desire to preserve the family home for future generations, took the step of adding their children’s names to the deed of the house.  The assumption is made that when the parents have both passed away, then the child(ren) will automatically receive ownership of the home.  While this is true, a difficulty may arise if one of the parents requires care in a nursing home, and Medical Assistance (MA) is going to be the method of payment for this care.  By adding names to the deed, the older person has in fact “given away” a portion of the house in the eyes of the Department of Human Services (DHS), the agency that oversees the MA program.  If the intention is to give the house to a child or children, it would be cleaner and more advisable to take the parent’s name off the deed entirely, but only if the parent is young and healthy enough that it is virtually certain that nursing care will not be needed for at least five years.  Still, our lawyers would almost never advise making this type of change.

The establishment of a trust is a safer way by which a parent may set aside property for a child or children.  When a home is placed into a trust, the trust becomes the owner of the property.  The placement of an asset (such as a house) into a trust is still considered a “gift” by DHS, so this method will need to be used at least five years prior to the expectation of a potential need for nursing care.  When establishing a trust, it must be irrevocable in order for the assets in the trust to be protected from the cost of long-term care.  The designated trustee is responsible for managing the assets in the trust, until such time as the grantor of the trust dies and the assets are distributed to the beneficiaries. The parent may remain as a lifetime tenant of the home.

A couple of specific situations do exist in which an older person may “give” the home to another individual without repercussions when MA is needed to pay for care in a nursing home.  Current regulations allow home ownership to be transferred to a minor, blind, or disabled child without any strings attached.  A home may also be transferred to a family caregiver under specific circumstances.  In this second situation, the older person who owns the home has required the aid of a caregiving child or sibling in order to remain in the home for a period of time prior to moving to a nursing home.  Under the Pennsylvania Caregiver Exception regulations, if such a close family caregiver has resided with the frail homeowner for at least two years, does not own another primary residence, and has provided a level of care which otherwise would have required institutional care for the older person, then the caregiver is eligible to receive the house free and clear.  The extent of documentation needed to verify this care may vary depending on the circumstances.  There are no penalties if the caregiver has received help in caregiving from other family members or outside care providers during the caregiving period.

When a couple owns a home together, and one is admitted to a nursing home, the spouse of the nursing home resident should not have to sell the house to pay for care.  If the ultimate goal is to preserve the home, we generally do not recommend that a nursing home resident remain as a joint owner of the home in this situation. Instead, for various reasons, we often deed the home into the name of the well spouse.

One of the complications which can arise if the home is jointly owned occurs if the spouse who remains in the home dies first.  In this situation, when the resident of the nursing home eventually passes away, the home will become a probate asset.  At that time, DHS will place a lien against the home in order to recoup the funds which were paid for care, which often may exceed the entire value of the home.  This claim process is called estate recovery.  A similar situation exists for a single individual who retains sole ownership of a home, moves to a nursing home, and is eligible to receive MA benefits.

Additional strategies to preserve the family home will be covered in next week’s article.  Use of these strategies can be combined with other tools which are available to help families put together a plan to manage assets and cover the cost of long term care.  Individual goals and circumstances will influence the type of strategies which are utilized.  Due to the extent and variety of regulations which govern these strategies, the advice and/or assistance of an elder law attorney is recommended in order for a family to receive the maximum benefit of a plan and avoid potential costly mistakes.

Dave Nesbit, Attorney, with Karen Kaslow, RN, BSN