In our November 2010 newsletter, we warned of some proposed Medicaid changes that unless modified, would go into effect on April 1, 2011. Unfortunately the Department of Human Services (DHS) has just released the new Medicaid rule changes as expected, the new rules are very similar to the proposed rule changes that were released in November. More importantly, the new rules will have a significant impact on seniors trying to protect their hard earned assets. Here are the Medicaid rule changes:
1. Jointly owned real estate is excludable only if it creates hardship for the other owners.
This is a significant change that will certainly have a far reaching effect. Previously, if a Medicaid applicant owned real estate jointly with another person (other than a spouse) for at least 5 years, it was considered unavailable if it could not be sold without the other owner’s consent and the other owner refused to sell. For example, a Medicaid applicant might own a cottage jointly with his or her children. Generally, the cottage would be a countable asset and subject to spend down. However, because the cottage was jointly owned (for at least 5 years) and could not be sold without the consent of all the co-owners, the cottage was considered an unavailable asset.
Under the new rule, jointly owned real estate will be excludable only if it creates a hardship for the other owners. A hardship is defined as:
“[A] co-owner uses the property as his or her principal place of residence and they would have to move if the property were sold and there is no other readily available housing.”
Clearly this hardship exception will be extremely difficult to meet. This will likely cause many forced sales of family cottages that have been owned for generations.
2. Pooled Account Trusts can only be established for someone who is less than 65 years old.
Pooled Account Trusts, under 42 USC 1396p(d)(4)(C), allow disabled persons to shelter excess assets and remain eligible for Medicaid benefits. Previously, there was no age limit to establish a Pooled Trust Account provided the person was disabled and the trust met the certain specific requirements. Beginning April 1, 2011, the disabled person must be less than 65 years old.
3. A 5 year look period applies for all transfer of assets for less than fair market value.
When the 3 year look back period was changed in 2007 to a 5 year look back period, any transfer made on or before February 6, 2006 still required the application of the 3 year look back period. Effective April 1, 2011, this exception no longer applies. All transfers for less than fair market value (subject to a few exceptions) will now require application of the 5 year look back period.
It will be very interesting to see the Medicaid rule changes that the new governor, Rick Snyder and his administration seek to implement in 2011. This could include estate recovery or other drastic changes. As always, we will continue to keep you informed of any changes. Without a doubt, these are precarious times for the elderly and their loved ones who are worried about having to spend all their hard earned assets on nursing home expenses. To determine the best options for your specific situation, it is best to consult with an experienced elder law attorney.