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February 2, 2006
SENIORS LOSE PROTECTION OF HOME
In the past, whenever one spouse needed nursing home care and the healthy spouse was living in their home, we were always able to reassure them that the house is protected. It was a non-countable asset. Unfortunately, under the new budget that the U.S. House is going to vote on this week, that is no longer true.
This week, on February 1st, we are expecting the United States House of Representatives to once again vote on The Deficit Reduction Act of 2005, also known as DEFRA. The history of this Bill goes back to Friday, November 18, 2005 when the U.S. House of Representatives approved the budget with a vote of 212 to 206. The Bill then went to the US Senate where the vote was deadlocked at 50-50 with Vice President Cheney breaking the tie by voting in favor of the budget. Because the Senate version as passed was slightly different from the House version, it must go back to the House to be voted on again. This vote is scheduled to take place this week on the 1st of February.
For those of you that have been following my recent articles you are aware of the major Medicaid changes that are included in DEFRA. These changes include an increase in the lookback period as well as the delay in the disqualification start date for gifts made after this new law is enacted. In plain english this means that any gifts made within 5 years of needing nursing home care must be returned and paid over to the nursing home. This week I’d like to discuss another Medicaid change if DEFRA is passed that removes the protection of your home if one spouse needs nursing home care.
Currently, if your spouse needs nursing home care, the home is non-countable as long as one spouse is living at the home. It doesn’t matter what the home is worth, only that the healthy spouse continues to live there. The new proposed law says that if one spouse needs nursing home care, their home cannot have more than $500,000 in equity. If the home’s equity is worth more than $500,000, they are not eligible for MassHealth (Medicaid).
We, in New England, are affected by this potential law more adversely than people in many other parts of the United States. Property values have skyrocketed to the point that many houses are now worth over $500,000. In Saugus, the town I was born and raised in, many homes now sell for more than $1 million. Building lots alone are going for over $400,000. So, what do you do if your spouse needs nursing home care and your home has increased in value to the point that you have more than $500,000 in equity?
I guess the answer is that you take out a loan. Loans reduce the equity on your home. But now you have another problem. You have too much cash to qualify for MassHealth. This in turn creates more problems as to how to afford to pay for all of the expenses of maintaining a home as well as making mortgage payments on this new debt.
By the time this article is published I expect that the U.S. House will have voted. Check back next week to find out the results.
This article gives general information and not specific advice on individual matters. Persons wanting individualized advice on matters discussed should contact an advisor experienced in those matters. To the extent this article provides information on legal matters, it is based on law in effect in Massachusetts on the date of posting (laws in effect in other states are often quite different).
Ronald H. Surabian is a CPA and attorney who works at the Elder Law Center in Saugus, Massachusetts. He also holds Masters in accounting and a Masters in tax law. He currently serves on the board of directors of the Massachusetts Chapter of the National Academy of Elder Law Attorneys. If you have any questions please call me at the Elder Law Center, One Essex Street, Saugus, MA 01906 (781)233-4444. To view this or any prior article, please visit our web site at www.elderlawcenter.org