Effective September 1, 2016 DHS Will Now Treat a Home in a Revocable Trust as a Countable Asset:

This could mean that current residents will lose Medicaid benefits.

 

On September 1, 2016, DHS changed the rules about how it treats assets in a Revocable Trust.  As a result, more applicants will be denied benefits.  Also, current recipients will lose their benefits.

Before The Change:

DHS treated a home in a Revocable Trust as an Exempt or Non-countable asset.  This means that the home’s value would not be used as an element to disqualify an Medicaid applicant from benefits.  This made sense because a home in a Revocable Trust retains homestead rights.  A couple or an individual could qualify even though the home was in the name of a trust.

After the Change:

Now DHS treats the family home as a countable resource if it is in a Revocable Trust.  What does this mean?

Current Residents:

 

Married Couples

Individuals

Potential loss or denial of Medicaid benefits if the home, together with other countable assets, exceed the certain limits.

Loss or denial of benefits as an individual is only allowed $2,000 in countable resources.

 

DHS’s Action Required:

Deed the property from trust to individuals or couples.

But how is the property venerable after restoration?

Married Couples

Individuals

If property is deeded to both individuals and the non-institutionalized spouse dies first, then DHS can place liens on the home for the cost that it incurred.

After 12 months of the stay in a nursing home there is a strong presumption that the individual will not return to the home and resume residency.

DHS will treat the home as a countable resource.  This  will require the sale of the home and spending down the funds to regain Medicaid eligibility.

 

What can be done to protect the home or it’s value?

Married Couples

Individuals

Steps to prevent liens:

The healthy spouse should maintain the home as his or her primary residence.

  In addition, considerations should be taken to further protect the home.  This may involve making the healthy spouse the sole owner and Estate Planning to prevent the property from reverting to the nursing home bound spouse.

Care should be taken to determine how deeds are created.  There may be a need to have the healthy spouse place the property into an Irrevocable Trust to avoid probate and for Medicaid Asset Planning.

If the individual in facing liquidation of the home, there are two choices.

1.      Sell the home then use the proceeds to pay for care until the resources dip below $2,000; or

2.      Sell the home, give some of the cash to a family member.  This creates a penalty period and some of the funds will be used to fund a Medicaid qualified promissory note or annuity to pay through the penalty period.

Result of option 2?

  35-45% of the proceeds might be saved for the family.

What can be done in our case?

 

 

Risk to Nursing Homes:

There is substantial risk that an individual in Medicaid payment status will become ineligible.  The directive to the caseworkers is to give the family a 10-day notice and if the home remains in the Revocable Trust, then an individual will become disqualified and a couple may exceed their resource allowances.

What Should a Nursing Home Should Do Today?

The worst case is to wait for the 10 day notice.

  1. If it is known that the client’s property is in a Revocable Trust, the family should be contacted to inform them of the risk of loss of the benefits.

  2. Include announcements in their statements.

  3. Have them attend an OnLine Class discussing what can be done.

This can likely mean that the nursing home resident will become ineligible for benefits.  A recent email from the DHS’s top attorney, said:


For several years OAC 317-35-41.1 said that home property held in a revocable trust retains its exempt character.  As of 9/1/16, this is no longer true, with OAC 317-35-41.1 being amended to conform to 42 U.S.C. § 1396p(3)(A)(i). DHS Medicaid eligibility workers have been given the following instructions:

Effective September 1, 2016, home property in a revocable trust is considered an available resource.  When a client’s (Medicaid recipient’s) home property is in a revocable trust, the worker informs the client, or his or her representative, that the home property exemption does not apply unless the property is removed from the revocable trust.  The worker provides the client or his or her representative with Form 08AD092E, Client Contact and Information Request, giving the client 10-calendar days to provide proof the property was removed from the trust.

(1)       When the client does not remove the property from the trust and the value exceeds the resource limit per Schedule VIII.D of the Oklahoma Department of Human Services Appendix C-1, Maximum Income, Resource, and Payment Standards, the worker denies or closes the SoonerCare (Medicaid) benefit.

(2)       When the client:

(A)       lives in the home and provides proof the home was removed from the revocable trust, it is excluded as home property;

(B)       does not live in the home or a nursing facility and does not plan to return home, the client must take steps to convert the property for use in meeting his or her current needs per (b)(1) of this Section; or

(C)       lives in a nursing facility, refer to Oklahoma Administrative Code 317:35-5-41.8 for the home property exemption time frame


 

 

 

About Richard Winblad

Richard Winblad is a lifelong Oklahoma City Metro resident with a law practice focused on Elder Law and Estate Planning. His practice focus helping seniors and veterans by giving sound legal estate planning advice including Medicaid Estate Planning and Veteran’s Benefit Qualification. In 1984, Richard graduated from OSU with an undergraduate degree in Business he later sought and earned a Law Degree from the University of Oklahoma in 1992. His practice is based in Edmond and is held in a beautiful pre-statehood home close to UCO at 102 E. Thatcher. He is president of the Oklahoma City Commercial Lawyers Association, a group that provides legal an ethical training for attorneys. He is also a member of “Lawyers with Purpose”, an organization that provides in depth training and support to attorneys who practice in the area of elder law. He received an AV Preeminent® rating by his peers through Martindale-Hubbell® Peer Review Ratings™. Dedicated to educating the public, Richard does workshops and presentations all around the state for professionals and laypersons. These programs provide vital information to our veterans and seniors as they look forward in planning living and financial needs that fit their desires.

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