Reed: Saving the homestead from Medicaid recovery

Sandra W. Reed
Special to the Reporter
Sandra Reed

Mr. Garcia’s wife passed away five years ago. When Mr. Garcia was diagnosed with dementia, the family urged him to execute a Lady Bird Deed which would transfer the homestead to his three children with his retaining a life estate and power to sell the property during his lifetime. He delayed taking this step so long that he no longer had the mental capacity to carry out the transfer.

His three children agreed that Sylvia, the unmarried sister would move in with Dad and take care of him. Sylvia had recently retired from her job as an elementary school principal, so this solution seemed ideal. After two years of this arrangement, Mr. Garcia’s dementia had progressed to the stage that Sylvia could no longer care for him. He has been living in the nursing home for three years now on Medicaid.

The Garcia family is afraid that, since no Lady Bird Deed was executed, Medicaid will take the house when Mr. Garcia dies as reimbursement for having paid for his care. Will that happen?

Exceptions to Medicaid recovery

The Garcias will not lose the homestead to Medicaid when Mr. Garcia dies. The Garcias are fortunate that an unmarried family member lived in their father’s home for at least one year prior to his having qualified for Medicaid. This circumstance created an exemption from the Medicaid Estate Recovery Program (MERP). When MERP sends notice of intent to attempt recovery from Mr. Garcia’s estate for the funds supplied for his care, the family will submit the evidence showing Sylvia’s residing in her father’s home for the period she did.

Planning to meet the exception of adult child living in homestead

All families who are concerned that they do not have adequate resources to pay from private funds for nursing home care should engage in Medicaid planning. Families in which at least one adult child is unmarried should consider the option of having an unmarried child move in with an aged widow or widower parent if the parent would qualify for Medicaid. Often the arrangement can be beneficial, not only to the parent, but to the child through rent-free housing.

Sandra W. Reed practices Elder Law in Somervell County, handling probating of estates, drafting of wills, trusts, powers of attorney and deeds as well as estate and Medicaid planning.  She lives on beautiful Chalk Mountain and can be reached at 254.797.0211; 817.946.2809 or at sreed@kbzlaw.com.