As people age, many worry about the cost of long-term care. Whether it is for themselves or a loved one, the prospect of paying for nursing home care can be daunting. In Massachusetts, like many other states, Medicaid may cover the cost of nursing home care, but the program has a right to recover its costs through a Medicaid lien on your home. However, there are ways to protect your home against a nursing home lien in Massachusetts for those who do not have long-term care insurance.
Understanding Medicaid Liens
Medicaid is a joint federal and state program that provides healthcare coverage for people with limited resources. Each state must operate a system that fits within federal guidelines to receive federal reimbursement for a portion of the state’s cost. In Massachusetts, the program is called MassHealth. MassHealth is administered by the Office of Medicaid (OM). MassHealth covers the cost of long-term care in a nursing home facility for those who meet certain income and asset requirements. When a person who has received MassHealth benefits dies, the program has the right to recover the cost of care from their estate.
The OM can recover the cost of care through a Medicaid lien on your home. A lien is a legal claim against property that serves as security for a debt. It is recorded at your local Registry of Deeds. This means that when the real estate is sold, the lien must be paid off before the owner or their heirs can receive any proceeds. Because it filed in the public record, it will be disclosed to any prospective buyer automatically when they conduct a title search.
To achieve estate recovery, the OM places liens on real estate owned by Medicaid recipients, unless certain relatives live at the property. These liens are known as “notice” liens, and the OM has no claim against the property while the recipient is alive. Typically, the lien only applies to the portion of the estate that is subject to probate. This means that if the home passes outside of probate, the lien may not apply.
Placing a Medicaid Nursing Home Lien on a Home
The OM can place a lien on a Medicaid recipient’s property only if the recipient is not expected to return home. The Medicaid application asks if the applicant intends to return home, but it’s a subjective question. If the applicant intends to return home and someone checks “yes,” the OM will require a doctor’s certification that they have a reasonable expectation of returning home. If so, then they will not file the lien. However, if the applicant checks “no,” indicating they don’t plan to return home, the OM will automatically place a lien without a doctor’s certification.
Revocable Living Trusts
Many people place their homes into a Revocable Living Trust (or “RLT”) to avoid probate as part of their estate planning. However, doing so can result in the OM considering the house as a countable asset if the owner applies for Medicaid. This will ultimate result in being denied for Medicaid benefits. The OM argues that the house loses its nonexempt status because the trustee or beneficiary can change the trust’s terms without the OM’s knowledge, allowing the house to avoid probate and estate recovery. A trustee could fix this problem by deeding the property back to the owners in their individual names in order to qualify. This is referred to as a “cure.”
Ways to Protect Your Home Against a Medicaid Lien
Several options are explained below that can be implement as part of your estate plan to protected your home against a nursing home lien.
Transfer Ownership of the Home to a Spouse
Transfers are allowed between spouses without penalty and do not disqualify one from receiving benefits. Removing a spouse’s name from a deed and placing it solely in the other spouse’s name won’t affect Medicaid eligibility. Further, the OM cannot place a lien on the house as the person who received benefits no longer owns it. The house remains protected so long as the survivor leaves the house to someone other than the spouse who received Medicaid benefits. This is a short-term solution, however, as the house will not remain protected if the surviving spouse requires Medicaid benefits.
Massachusetts Life Estate Deeds
A life estate deed can effectively protect your home against a Medicaid lien in Massachusetts. With this type of deed, the property owner creates a life estate for themselves and transfers the remainder interest to their children (or other designated beneficiaries). This arrangement allows the at-home owners to remain in their homes and maintain control of the property during their lifetime. Additionally, it ensures that the property passes to their heirs outside of the Medicaid recipient’s probate estate when they pass away.
One of the primary benefits of a life estate deed in MA is that it generally provides complete protection from estate recovery by the OM. When the last life tenant passes away, the remainder beneficiaries own 100% of the property automatically, bypassing probate and avoiding any potential Medicaid liens. Additionally, the property owner retains most of the control over the house during their lifetime, making it a highly flexible option (compare this to the irrevocable trust option below).
It’s important to note that, like irrevocable trusts, creating a life estate deed in MA may trigger a look-back period during which the owner may be disqualified from receiving Medicaid benefits (for up to five years). Therefore, it’s crucial to consider whether you have sufficient funds to pay for nursing home costs privately during this period. In the event of a disqualification, having the remainder beneficiaries deed back their interest to the life tenant can effect a cure.
Medicaid Irrevocable Trust
A second option is to use a Medicaid Irrevocable Trust to protect the real estate. The trust must be irrevocable and the person creating the trust, the “Grantor,” should not be a trustee or have access to the trust principal. This means that once the trust is created, the Grantor cannot change the terms of the trust or access the assets that are placed in the trust. The trustee of the irrevocable trust must be someone other than the Grantor.
The irrevocable trust can own the home or other real estate, and the home can be transferred into the trust. The home will no longer be in the individual’s name, so it is not considered a countable asset for Medicaid eligibility purposes.
Using an irrevocable trust has several benefits. It allows the individual to protect the home while they are alive, and it provides a way for the home to pass to their beneficiaries without going through probate. Additionally, because the home is owned by the trust, it is protected from estate recovery by Medicaid. As noted above, however, the grantor loses most of their control over the property with an irrevocable trust. The benefits of this kind of trust, therefore, must be weighed against this limitation.
Purchase Long-Term Care Insurance
Finally, one of the best ways to protect your home from a Medicaid lien is to purchase long-term care insurance. Long-term care insurance is a type of insurance policy that covers the costs associated with long-term care services, such as nursing home care, assisted living, and home health care. This insurance can cover expenses that aren’t covered by other types of insurance, such as Medicare or private health insurance.
Long-term care insurance can effectively protect your home from a Medicaid lien, as it can help cover the costs of long-term care services. This can help prevent the need to rely on Medicaid to cover these costs, which can help protect your home and other assets from estate recovery. Of course, not everyone can afford long-term care. Therefore the above-referenced alternatives may be the best course of action.
Protecting your home from a Medicaid lien in Massachusetts can be a complicated process. There are several options to consider, including transferring ownership of the home, creating a life estate deed, using an irrevocable trust, and purchasing long-term care insurance. Remember, planning ahead is key when it comes to protecting your assets from a Medicaid lien. It is best to start thinking about long-term care and Medicaid planning well before you need it.
Each of these strategies has its own benefits and drawbacks, so it is important to work with an estate planning attorney who can help you make the best decision for your situation. Contact our Estate Planning Attorneys today if we can help you with your estate planning needs.