Protecting the House

How do I protect my home from the State?

When applying for the Maine Medicaid (MaineCare) benefit that pays for long-term care services, the applicant’s primary residence does not count towards the $10,000 asset limit in most circumstances. This means that an individual can keep his or her home and still receive MaineCare benefits.

However, the State of Maine will seek reimbursement from the MaineCare recipient’s estate after death. This is called estate recovery. Even though owning the home did not affect MaineCare eligibility during the individual’s lifetime, it is subject to estate recovery and may need to be sold to repay the State of Maine upon death.

Planning strategies for the home often involve transferring it outside of the individual’s ownership and control so that it will not be part of the individual’s estate after death, and therefore not subject to estate recovery. However, the individual must be cautious about simply giving the home away because of the MaineCare “five year lookback.” When an individual applies for MaineCare, he or she must disclose any transfers of assets within the lookback period. If the applicant has transferred assets, a penalty is imposed. The penalty is a period of time during which the individual will be ineligible for MaineCare – but that period does not start to run until they are below the MaineCare asset limit. The result is that the individual does not have private funds to pay for care but also is ineligible for MaineCare benefits to pay for that care.

A solution that works for many families is funding an asset protection trust. An asset protection trust is specifically designed to plan for MaineCare benefits eligibility, and the goal is to create and fund this trust five years before long-term care is needed. Transferring the home to an asset protection trust is typically recommended over outright gifting for many reasons:

  • It can retain certain protections for the individual even though he or she is giving up control and ownership of the home.
  • It protects the home from children’s liabilities during the parent’s lifetime.
  • A trust outlines what will happen to the home after the individual’s death to ensure that his or her wishes are followed.
  • There are significant tax benefits to heirs in using a trust.

The best way to determine whether an asset protection trust is appropriate for you is to meet with an elder law attorney who can evaluate your particular circumstances. Give us a call to schedule a meeting with one of our attorneys!

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