Creative real estate and care solutions

When seniors need to pay for care, they may be cash poor but living in a home with substantial equity.

One immediate reaction might be to transfer the house to the children and then figure Medicaid would pay. That is usually wrong. Unless there is a clear exception such as a disabled child or caretaker child, transfer of a house out of your name does not work and can disqualify you for benefits. Also Medicaid only pays for skilled care.

Some seniors move into a Continuing Care Retirement Community (CCRC). The large initial deposit is often handled by the proceeds from sale of the house. These communities have different levels of care and many have life agreements that allow the senior to continue to stay if they run out of funds. To know the details you should have an attorney review the contract.

Another common solution is to sell the house and spend down the funds in assisted living/personal care. This does not commit the individual long range, and does have the appeal of living in an attractive environment so long as funds are available. Note that there is no Medicaid “safety net” in assisted living/personal care. However, you might qualify for tax deductions for assisted living/personal care as medical expenses.

Assets need to be monitored to extend the stay in assisted living. Also, it is not a good idea to wait until funds run low before applying for nursing home admission since nursing homes prefer admitting new residents who are able to pay privately for a period of time before Medicaid picks up the cost.

Reverse mortgages may provide another alternative. They relate to people who intend to stay in their homes indefinitely and can offer a way to access the cash value of the property. They help in some cases, but if the senior’s condition worsens to the point he/she has to move to assisted living or nursing home and the house is un-

occupied for over a year, then the mortgage would go into default.

With all of these possibilities, and many more, the important point to realize is there is no one right answer for everyone. You need a plan. Here are some ideas. Family Agreements can use real estate equity to compensate family members who help and those who contribute. The majority of Medicaid (government) funds are used to pay for nursing home care, and not for at-home care and services, although there is an at-home Medicaid waiver program.

On the other hand, if a senior can “hire” her children privately to help with her care, she can extend her time at home and compensate those children and family members who actually assist her.

Another possibility is to set up a system where adult children contribute financially toward paying for care by an outside caregiver and other expenses needed by the parent. There needs to be a written agreement. It generally must be entered into before services are performed or payment made. Over the past few years, our office has prepared increasingly more family agreements.

Suppose the senior is limited in cash but has equity in his/her home or other real estate. Readers might ask where the senior can get the funds even to pay family.

Here are some possibilities.

• Private reverse mortgages. We might prepare a mortgage where the holder of the mortgage is the adult son or daughter. In exchange for contributing to a parent’s support, the son or daughter could have a recorded document reflecting his or her contribution. This takes precedence over most creditors, including Medicaid.

• Whole house for cost of half a house. This is a joint tenant with right of survivorship. An adult child could buy fifty percent of the value of his/her parent’s residence and actually pay for it. The cash from the child can be used to support the parent’s care at home and assisted living expenses if the parent moves. On the parent’s death, the child would become the sole owner of the property and there is no Medicaid penalty.

• Parent purchases needed improvements to adult child’s home. Improvements might need to be made to an adult child’s home to allow parents to move in, such as an additional bath or bedroom. The parent sells their home and uses part of the proceeds to pay for the improvement. A Written Family Agreement is needed.

These are only a few ideas we have used. Others suggest themselves by the facts of the individual situation.

Another common solution is to sell the house and spend down the funds in assisted living/personal care. This does not commit the individual long range, and does have the appeal of living in an attractive environment so long as funds are available.