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SUCCESS STORY OF THE MONTH

A married couple owns a homestead located out-of-state held in a trust. They move to Texas to be closer to their children since the wife needs long-term care. They have no long-term care insurance, and their liquid assets and income are insufficient to pay for her long-term care. Both of them own mineral rights. The wife’s mineral rights exceed the value for the mineral interest to be “non-countable” for long-term care Medicaid eligibility (only non-countable if less than $6,000). They also own other (although limited) countable resources, and their combined income is too high (more than $3,160.50 per month) for immediate long-term care Medicaid eligibility without “spend-down.” An out-of-state homestead counts as a resource for Medicaid eligibility.

Furthermore, a home held in trust, whether revocable or irrevocable, is generally a countable resource. The husband will be out of cash in short order if long-term care Medicaid eligibility is not achieved due to the cost of private care. The family also desires the wife’s mineral interests stay in the family.

If long-term care Medicaid is achieved, the government will pay the majority of the wife’s long-term care (the nursing home) costs in addition to medication costs. This would permit the husband not to be forced to spend almost their entire life savings (since Medicare will not pay for the wife’s long-term care costs) until Medicaid eligibility is achieved.

Long-term care Medicaid takes a “snapshot” of the couple’s resources as of the first day of the month of continuous institutionalization for thirty (30) consecutive days. If the well spouse (the “community spouse”) has income that exceeds $3,160.50 per month, then almost all of the income of the institutionalized spouse (minus a few deductions) would be the co-pay amount for which the couple is responsible for the wife’s nursing home care costs. The government would be responsible for the balance of her care costs.

The solution, in this case, was relatively simple. First, since a homestead in a trust is a countable resource, the deeding of the property alone would have gotten the couple below the “protected resource amount” if the homestead was in Texas (since this is a non-countable resource if not held in a trust) – so the property was deeded out of the trust. However, since the homestead was not in Texas, the property had to be placed for sale to prove that the couple are residents of Texas. Since the house counted as a resource at the snapshot date (since the property was held in trust and was out-of-state), deeding the property out of the trust and placing the property for sale alone achieved eligibility as of the first day of the month after the property was placed for sale (any real estate placed for sale does not count as a resource) without spend-down due to the equity value of the home. To reduce the co-payment to the nursing home, the children bought their mom’s mineral interest rights at fair market value as determined by the Medicaid eligibility rules. Thus, the mineral income would be owned by the family (not the wife), and therefore the co-pay would not include any of her mineral income. Of course, the mineral rights stayed within the family. The mineral rights could not be given to the family members as that would result in a transfer penalty under the Medicaid rules. Finally, to avoid Medicaid estate recovery (the state has a right to claim the property after the wife’s death for benefits advanced on her behalf if husband predeceased her), a Ladybird Deed (enhanced life estate deed) was prepared since the Texas Medicaid program only goes after estates that pass by Will or intestacy (no Will).

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