As discussed in previous postings, to be eligible for Medicaid in 2016, a Medicaid applicant must have resources (or assets) no greater than $14,850.00 in total. Despite this low threshold many individuals are Medicaid recipients despite owning a valuable asset – their home. This is achieved because of the homestead exemption.
A homestead is defined as the primary residence occupied by a Medicaid applicant or Medicaid recipient and/or members of his or her family. Family members may include the Medicaid applicant’s or Medicaid recipient’s spouse, minor children, certified blind or certified disabled children, and other dependent relatives. The homestead includes the home, land and integral parts such as garages and outbuildings. The homestead may be a condominium, cooperative apartment or mobile home. Vacation homes, summer homes or cabins are not considered to be homesteads. i
New York Social Services Law states that the home shall be exempt and shall not be taken into consideration in determining a person’s eligibility for medical care, services and supplies available from Medicaid. However, the individual shall not be eligible for Medicaid if the individual’s equity interest in the homestead exceeds eight hundred twenty eight thousand dollars ($828,000.00) in 2016.
Example: Sally of Smithtown, NY is 95 years old living at home with her son, Sean. Bad luck struck the household when Sean suffered a back injury at work. His doctors told him that he would be unable to engage in any substantial gainful activity by reason of his physical impairment which can be expected to last for a continuous period of not less than twelve months. Sean started receiving social security disability. The bad luck continued when Sally suffered a stroke and entered a nursing home where she is expected to remain. She applies for Medicaid and at the time of application she owns her home and it is worth $900,000.00. Sally is eligible for Medicaid and the value of the house does not count — her house is an exempt homestead. Although her equity interest in the homestead exceeds $828,000.00, the home equity limitation does not apply because Sean is lawfully residing in her homestead and is Sally’s child who is permanently and totally disabled as defined in section 1614 of the federal social security act.
Example: Carol of Commack, NY is 77 years old and a widow. Carol has three children including Cara who is Carol’s named agent pursuant to a power of attorney executed 5 years ago. She was named as Carol’s agent because she is an accountant and “good” with paperwork and lives close by in Hauppauge, NY with her husband. After many conversations with her mother, Cara finally convinced Carol to make some repairs to her home including updates to her kitchen and bathroom. Carol took out a reverse mortgage and used the proceeds to pay the contractors to make the updates to her home.
After breaking her hip, Carol entered a nursing home where she is expected to remain. She applies for Medicaid and at the time of application she owns her home and it is worth $900,000.00. Carol is eligible for Medicaid and the value of the house does not count — it is an exempt homestead. Although the fair market value of the home is $900,000.00, because she has an outstanding balance of $200,000 with the reverse mortgage company, her net equity interest in the homestead is $700,000.00 and now below the $828,000.00 limit.
To be continued….
Aaron E. Futterman, CPA, Esq. is a partner in the law firm of Futterman & Lanza, LLP with offices in Smithtown, NY and clients throughout Suffolk, Nassau, Queens, Brooklyn, Bronx, Richmond, New York, Westchester and Rockland Counties. He concentrates his practice to Elder Law, Medicaid Planning, Medicaid Applications, Estate Planning, Probate, Estate Taxes, and Estate Administration.