Up to certain limits, a nursing-home resident’s home is not counted against the asset limit for MassHealth eligibility so long as the resident intends to return home. (Although this sounds paradoxical, “intent” is actually simple to establish.) The default limit on excluding the home as a countable asset is $500,000 of home equity. Some states, including Massachusetts, have exercised an option to increase that limit. In Massachusetts, the limit is currently $828,000. Notably, the limit is not applicable so long as a spouse, minor child, or disabled child of the nursing-home resident is living in the house.
For these reasons, MassHealth eligibility is an immediate concern to unmarried nursing home residents who own a home. Many nursing home residents do not have to sell their homes to qualify for MassHealth, but if the home is sold, the proceeds are not protected. Furthermore, under certain circumstances, MassHealth will put a lien on the property that entitles it to reimbursement upon sale. Finally, if the house remains in the MassHealth beneficiary’s probate estate, it will be subject to estate recovery.
For example, a nursing-home resident who owns an $800,000 home has a $50,000 “countable” asset, and will be ineligible for MassHealth coverage. In this situation, there are a few options:
1. Sell the house and spend the proceeds.
2. Borrow $50,000 against the house to lower the equity to $750,000.
3. Use a lower appraisal to argue that the valuation is wrong. Massachusetts will accept a tax valuation, but you may try to show that the actual market value is lower than the tax assessment.
4. Work out a deal with the nursing home whereby the facility will provide $50,000 of care in exchange for a mortgage on the property.
Special rules apply with respect to the transfer of a home. In addition to being able to make the transfers without penalty to one’s spouse, or blind or disabled child, or into trust for other disabled beneficiaries, the applicant may transfer her home (or an interest therein) to:
1. A child under age 21
2. A sibling who has lived in the home during the year preceding the applicant’s institutionalization and who already holds an equity interest in the home, or
3. A “caretaker child,” defined as a child of the applicant who lived in the house for at least two years prior to the applicant’s institutionalization, and who, during that period provided such care that the applicant did not need to move to a nursing home.
Finally, a non-exempt transfer can be “cured” by the return of the transferred asset, either partially or in its entirety. In other words, if a mother gives $100,000 to her son, but within five years needs nursing home care, the son can transfer back the funds. Then, she can spend the money, apply for MassHealth coverage, and be evaluated for eligibility as if she had never made the initial transfer.