Medicaid benefits in long term care is one of those topics that a lot of people know a little bit about. But if you know anything about the topic, you probably know that a person’s homestead is exempt. The purpose of this article is to shed a little more light on that topic.
An exempt homestead is the house a person lived in before entering into long term care, or the home their spouse continues to live in if they are married. For single people, there is a limit to how much the house can be worth, but no limit for homes in which the spouse resides.
The exempt homestead includes the house itself, and all “contiguous “ land. To be contiguous, the land must butt up against the property on which the house is set. Land is still considered contiguous even if one parcel is across the road from another. But if there is a residential building other than the homestead on the property, that second residence is not covered by the homestead exemption.
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Although the home is exempt, for the families of single people on Medicaid in long term care, the bigger challenge can be maintaining the property. Converting homestead property to rental property gives rise to difficulties faced by all landlords, and at the same time might generate income that increases the amount that the Medicaid beneficiary has to pay for their care.
But leaving the home unoccupied creates issues, including dramatically higher insurance costs as well as the prospect of vandalism and dilapidation.
“Clients often know that the house is exempt,” said Attorney Susan Chalgian, “but they don’t always have a great plan for how to maintain the property once the Medicaid application is approved.”
While Medicaid rules allow funds to be spent down on some types of improvements to the exempt homestead, they do not allow for funds to be used to prepay the ongoing expenses associated with the maintenance of the property.
Finally, if the Medicaid beneficiary still owns the house when they die, the home can potentially be subject to Michigan’s “estate recovery” law whereby the State looks to recover the costs of care paid from the estate of a deceased Medicaid beneficiary.
Currently, estate recovery claims against the exempt homestead can be avoided by relatively simple legal maneuvers, but that could change.
“In the end, decisions about what to do with an exempt homestead are more involved than most people initially appreciate,” explains Attorney Chalgian.