Don't Lose Your House to a Medicaid Lien!

After the funeral or memorial service, the government will notify your partner -- even if you own the home jointly with rights of survivorship -- (or if your partner dies before you, they will approach the beneficiaries you named in your will or trust)and offer them the choice of paying off the Medicaid lien, and, if they are unable to do so, the government will likely force a sale of your home and keep the proceeds, up to the amount that is owed to them. If there is any money left after all expenses are paid, your partner or other beneficiaries will get to keep the extra.

Because your partner is likely to lose his or her home to nursing home costs, it becomes important to protect your home from a Medicaid lien.

The first thing to remember is that a Revocable Living Trust will not protect your home from nursing home costs! This is one of the most common misunderstandings. Many people have a “living trust” and think they are safe. A living trust (also called Revocable Living Trust) will protect your assets from probate, but it will not protect from nursing home costs.

For couples who are fortunate enough to live in a state with marriage or marriage-like protections for same-sex partners, the government will not place a lien on your home as long as your partner (if you are married or have entered a civil union or registered as domestic partners) is living in the home. Even for those lucky enough to have state recognized relationships, the danger is that a partner who is not in a nursing home may predecease you or may also end up in a nursing home. Then the home is no longer protected from Medicaid liens.

But don't worry! You can protect your home from a Medicaid lien by setting up an irrevocable trust. Your partner (or someone else you trust) can be trustee of your irrevocable trust. You can then deed your property to the irrevocable trust, but keep a life estate for yourself.

Keeping a “life estate” means that you legally have the right to live in your house as long as you are living. Nobody can kick you out. Yet, you have legally given away a “legal title” in the property to the trustee (your partner or someone else you trust). Then, when you die, the house will pass to your partner or, if you have no partner or your partner dies before you, your house will pass to your alternate beneficiaries.

You may purchase a stand alone Medicaid Trust here or add it to your purchase of a Last Will or Living Trust Package.