By Fredrick P. Niemann, Esq. of Hanlon Niemann & Wright, a Freehold, NJ Medicaid Attorney

I received a call from a frantic son. His father gave him and his brother the father’s home and the dad retained a Life Estate. This happened in 2011. In late 2017 the father goes into a coma but just a few months ago he awakens but is mentally incapacitated now. Mother (who is not on the Deed to the home) and sons want to sell the father’s home. The father does not have a power of attorney. So, I was asked is there something that can be done in order to sell their father’s home?

Well, guardianship is an option for sure. But here is another question – should the family sell the house? The proceeds received for Dad’s life estate will disqualify him from Medicaid benefits if he needs skilled nursing care. If you keep the house as its currently deeded, it’s exempt from Medicaid calculation?

If the house is not sold, Medicaid will only grant eligibility if the house generates income, meaning it has to be rented at fair market value. I had a client a couple years ago insist she wanted to live in a nursing home facility because she was, in declining health, lonely and wanted the activities. She executed a life estate deed 12 years prior to her daughters. She refused in-home Medicaid, she wouldn’t hear of a reverse mortgage and in-home care. So, the house was listed for sale, nursing home accepted her as Medicaid applicant, she was determined eligible for Medicaid because the house was listed for sale (liquidation plan). When the house closed, literally on the day after her eligibility, her life estate was valued at $80k and she received a check. She was then off Medicaid until the payback was satisfied and the remainder was delivered to the nursing home in escrow. Upon exhaustion of the $80k, Medicaid reinstated her. Daughter’s received proceeds of around $100,000 free and clear.

So, the moral of this blog is twofold. Get a Power of Attorney and think twice before selling the home, if a life estate is in place.

To discuss your NJ Medicaid matter, please contact Fredrick P. Niemann, Esq. toll-free at (855) 376-5291 or email him at fniemann@hnlawfirm.com.  Please ask us about our video conferencing consultations if you are unable to come to our office.