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Medicaid applicant fails to prove she lived at Life Estate property for one year

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Just last week, I posted an article on domicile.  The point of that article was that it’s important for the individual to make it clear where their domicile is for tax purposes.  But here’s another reason domicile is relevant and why individuals should be clear as to what they consider their domicile.

A New York Medicaid applicant applied for and was turned down for Medicaid assistance when she entered a nursing home because she couldn’t prove that she lived in her Life Estate property for one year.

There’s a law that permits an individual to purchase an interest in the home of another individual (likely a family member) for the actuarial value of the real estate.  For the home to qualify as a Life Estate and therefore be exempt from Medicaid rules about gifting, the individual must live in the house for at least one year.  Because the home is co-owned, though the ownership does not occur at the same time, the property avoids probate but it also avoids the gifting problem with assets based on Medicaid rules.

In the New York case, Frances Albino purchased a life estate on Diffen Road in Cicero, New York.  She listed her residence as the address in Cicero on her driver’s license.  Then in October 2007, she purchased another life estate, this time with her daughter and grandson on Lakeshore Road for $70,000 ($35,000 each to her daughter and grandson).  Thirteen months later she entered an assisted living facility.  In January 2010, Albino fell and broke her hip.  After the fall, Albino resided in a nursing home.

She was a private pay client at the nursing home from March 2010 until October 2010.  In April of 2010, Albino applied with DSHS for medical assistance.  She was denied in June 2011 based on the fact that her voting record, tax returns, and driver’s license all used the Diffen Road address.  Because the Lakeshore Road property wasn’t treated as her domicile, the money she paid her grandson and daughter was treated as a transfer of assets for less than fair market value.  For the purposes of Medicaid, the burden of proof is on the individual to prove that the transfer of assets for less than market value was not motivated by future needs to qualify for Medicaid.  Because of the short period of time between the transfer of assets and the entrance to the assisted living facility, DSHS made her ineligible for a penalty period coinciding with the transfer.

You don’t have to go broke to take advantage of Medicaid.  But you do need to understand the rules and planning techniques that surround Medicaid Law.  Missing a step will potentially cost you tens of thousands of dollars or much, much more.  Take the guess work out of your retirement planning and avoid planning missteps by hiring an elder law attorney with in-depth experience on Medicaid planning and other elder law issues.   Come to a seminar and see what planning steps you’re missing when you plan for the last third of your life.



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