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March 10, 2005
SENIOR SISTERS
Sisters and brothers who lived together as children are now moving back to live with each other in their senior years. Sometimes it is a result of the death of their spouses and their desire to not live alone. Other times it is a financial reason that due to the escalating costs of living combined with the stagnation of their fixed income, it is the only way of affording to keep their house. From a MassHealth perspective, this housing arrangement creates certain challenges in the event that either senior sister needs nursing home care.
What would happen if one of the sisters needed nursing home care? Could the other sister continue to live in the house? Could she afford to keep the house? Today’s example will take a look at how the MassHealth regulations affect senior sisters that are living together and what steps they could take to protect their financial security.
“Peg” and “Sue” are widows, aged 77, and twins. While they were married they lived in different parts of the country but have moved back together for companionship and to reduce their cost of living. “Peg” moved into “Sue’s” house, which is assessed for $300,000, after she sold her own home. They have their own savings accounts but have a joint checking account that is used to pay bills. This checking account has grown to over $100,000. “Sue’s” health has deteriorated and was hospitalized for three nights and then placed in a nursing home.
Well, the big question is whether “Peg” can continue to live in “Sue’s” house. The regulations that we need to look at are in the Code of Mass Regulations (CMR). Under 130 CMR 520.007(G)(8) the home will be a countable asset unless one of the following individuals are living in the home:
1. A spouse
2. A child under age 21 or who is blind or permanently and totally disabled;
3. A sibling who has a legal interest in the home and who was living there for a period of at least one year
4. A son or daughter who was living in the home for at least 2 years prior to the parent’s institutionalization and provided care that allowed the parent to remain at home; or
5. A dependent relative.
The problem is that “Peg” was never added to the deed of the house. If she had been added to the deed, the house would have been non-countable under exception #3 listed above. In this case, the house will be a countable asset of “Sue’s” and since the asset limit for a single person needing nursing home care is $2,000, “Sue” might not be eligible. I say, “might not be eligible”, because MassHealth does not like to make elders homeless. MassHealth would probably allow “Peg” to live in the property but they would place a lien the property. Once “Peg” dies or moves out, the house would be sold and MassHealth would be reimbursed for nursing home and medical expenses paid on behalf of “Sue”.
The next problem is the joint bank account. The joint bank account will require some attention because, 130 CMR 520.005(C) states that the applicant is considered the owner of 100% of joint bank accounts. “Sue” will be considered the owner of 100% of the joint bank account unless “Peg” can prove that some of the money was hers. If this account had been opened many years ago, tracking down the origin of all of the deposits to prove ownership could be a difficult task.
So now we know that there are some potential problems if either sister needs nursing home care. What could they have done to prevent these problems? There isn’t enough room in this article to cover every possible solution, but here are a couple things that would certainly help.
THE REAL ESTATE - If “Peg” and “Sue” knew of the problem they could have done some planning that would have made the house non-countable. The simplest thing that they could have done is to add “Peg” to the deed making her a joint owner with “Sue”. This would have made the property non-countable if either of them entered a nursing home. Under the MassHealth rules, adding someone to your deed is considered a gift, and whenever you make a gift you become disqualified from MassHealth benefits for a certain amount of time. In this case “Sue” would be considered to have made a gift to “Peg” of $150,000 ($300,000 assessed value/2=$150,000) and there would be an associated disqualification period of 647 days. As long as neither of them needed nursing home care within 647 days, the home would thereafter be protected if one of the sisters needed nursing home care.
Another possible solution would be to protect the house, even if both of the sisters needed nursing home care. This could be accomplished by transferring the house into an irrevocable trust. The only problem with this method is that the disqualification period would be twice as long, about 43 months. Under this scenario, both sisters would have to stay healthy for about 43 months, after which the home would be protected even if both sisters ended up in the nursing home.
THE JOINT BANK ACCOUNT – The simplest cure for this potential problem is that “Peg” and “Sue” should only keep a minimal amount of money in the joint checking account. As bills come in that need to be paid, they should transfer enough money from their individual savings into the checking account. This would make it much easier for them to prove that they each own one-half of the account.
ESSENTIAL ESTATE PLANNING DOCUMENTS – There are three basic estate planning documents that each of the sisters should have. These are a will, a durable power of attorney and a health care proxy. The will governs the disposition of your assets upon your death. The durable power of attorney (DPOA) and health care proxy are used while you are alive and are very important documents in the event that you become incapacitated.
The agent under a DPOA is given certain powers to handle your financial affairs. Generally, these are needed when a person can no longer handle their financial affairs. If someone becomes incapacitated, the agent would have the power to transfer assets pursuant to a sound estate plan.
Many people think that because their assets are held jointly that they do not need a DPOA, “because there is another name on the account”. But this in fact is not true. If you own real estate, both owners must sign the deed (or an agent under a DPOA). A power of attorney is also needed to transfer life insurance policies, sell stock or mutual funds and obtain medical records.
Health Care Proxies are documents that allow you to name another to make your medical decisions for you if you are unable to do so yourself. There is something else called a Living Will. A Living Will is a statement of what your medical wishes are in the event you become ill.
In 1990, Massachusetts established its preference for the Health Care Proxy over the Living Will when it codified the Health Care Proxy Law. There is no comparable law in Massachusetts for the Living Will so we always recommend a Health Care Proxy and never prepare a Living Will. Even though Massachusetts does not require notarization of the signatures, we notarize our health care proxies in case they are used in another state that might require it.
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, Ma. He also holds a 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.