By Kathleen Kienitz, Esq. CELA
A recurrent question in the context of estate planning, is what can I do to protect my home? To get to the answer, it is necessary to first ask: protect it from what? More often than not, the answer to the second question is usually along the lines of: from the state being able to take it. This concern usually arises from things people have heard about the homes of acquaintances that had to be sold in order to satisfy a claim against the estate for expenses paid by the state for long term care. It is true that this can happen, but there is a lot of misinformation swirling around about how and when it does happen.
If one receives assistance from the state for long term care from the MaineCare program, the state may try to recoup those expenses from the equity in the home. They can only do so if a number of factors have been met. First of all, if the home owner is still living, the state has no right to force the sale of the home. This is true even if the individual is in a long term care facility with no hope of ever returning home. All one must do is express the intention of returning home. It is only after the MaineCare recipient has died that the state can assert its claim. Even then, no claim may be made by the state if the MaineCare recipient has a surviving spouse or a disabled child. If there is no surviving spouse or disabled child, the state will bring its claim in Probate Court, and the Personal Representative of the estate will need to pay the claim, generally by selling the home and to the extent there are proceeds enough, using them to satisfy the claim. In some instances, there will not be enough to satisfy the claim and in others, there will be assets remaining to distribute to beneficiaries of the estate.
To protect the home from this eventuality, there are steps that can be taken. This, however, opens up a whole new set of considerations. First of all, it necessarily involves changing ownership of the home in some form or another which opens up the possibility of becoming disqualified from eligibility for long term care assistance. Any transfer of asset made within five years of applying for long term care assistance will result in a penalty period of not being eligible. So an important consideration before making any such changes to ownership of the home is whether there is any possibility that such assistance might be needed within five years.
If it seems a safe bet to proceed given this consideration, the next issue is what type of transfer would be best.
The possibilities range from a complete transfer giving up all instance of ownership, to joint ownership with right of survival, to retaining a life estate, to a deed which only transfers at death. All of these choices carry varying degrees of protection and risks to the transferor, ranging from loss of control and unforeseen tax consequences and complete protection to probable protection. In short, transferring the home to protect it can be a good planning strategy, but it is not one that should be undertaken without a thorough consideration and understanding of all of these issues.
Originally published in the Sun Journal, Living Well Series, April 23, 2021