Aging Caregiver, Adult Son with Schizophrenia, and Medicaid Home Care
Ruth is 74 and cares for her son, Marcus, 45, who has schizophrenia. Marcus receives $967 per month in SSI and SNAP and lives with Ruth in her home, worth $350,000 with no mortgage. Ruth has $180,000 in savings, a pension of $2,200 per month, and Social Security of $1,800 per month. She has no long-term care insurance. Marcus has difficulty managing money and sometimes stops taking medication. Ruth wants to leave the home to Marcus and keep him in it after she dies. She may eventually need nursing home care. Her attorney warns that leaving the home outright could affect Marcus's SSI, and that transferring the home now could affect Ruth's Medicaid eligibility. Ruth asks whether she can put the home in a trust for Marcus, whether Marcus can stay in the home, and how to pay for her own care if she enters a nursing home.
1. Analyze what would happen to Marcus's SSI and Medicaid if Ruth leaves the house outright to him versus to a third-party special needs trust. Include the principal residence exclusion and estate recovery.
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If Ruth leaves the house outright to Marcus, SSI may exclude it as his principal residence if he lives there and uses it as his home. The exclusion is not unlimited: he must keep it as his home, pay property taxes and utilities, and if he sells, the proceeds become a countable resource. If he cannot maintain the house, the exclusion may not help. Medicaid estate recovery may also claim against Ruth's probate estate after her death if she received Medicaid, although there may be hardship or deferral if Marcus lives there. If Ruth leaves the house to a third-party special needs trust, the trustee can sell or rent it, use the proceeds for Marcus, and avoid making it his resource; the trust is not Ruth's probate estate. The judgment is between keeping the house as a home with risks and converting it to a managed fund for his care.
2. Explain the Medicaid look-back and whether Ruth should transfer the home now to a trust for Marcus. What alternatives protect both Ruth and Marcus?
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Ruth should not deed the home to a trust for Marcus now. A transfer for less than fair market value within the Medicaid five-year look-back can cause a period of ineligibility for nursing home care. The home is an exempt resource while Ruth lives in it, so she does not need to give it away to qualify for home-based care. If she enters a nursing home, the home may remain exempt if she intends to return, or it may be sold; the state may recover after death. A better plan is a will or revocable trust that leaves the home to a third-party special needs trust at her death, when the look-back does not apply. She should also consider a caregiver agreement, but it must be for fair value and documented. She needs a Medicaid planning attorney to compare the risk of transfer with the risk of losing the home to estate recovery.
3. Recommend a plan for Marcus's housing and support if Ruth dies or enters a nursing home, including the role of a pooled trust or waiver.
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Marcus needs a housing plan before Ruth dies, not after. The trustee of the third-party special needs trust can use funds for rent, utilities, and support, and can coordinate with a Medicaid home and community-based waiver, Section 8, or supportive housing. A pooled trust subaccount may be useful if no family trustee is available, but because Ruth's funds are third-party, it should be a third-party pooled trust rather than a first-party payback account. Ruth should write a letter of intent with Marcus's medications, providers, behavior plan, and housing preferences, and name a successor advocate. If Marcus cannot manage the home, the trustee should be authorized to sell it and invest the proceeds. The judgment is to separate the house from his SSI eligibility and to build a support team, rather than assume he can live there alone.