24 Aug Government Assistance for Care Could Depend on Homestead Definition
Homestead Resource Exclusion Differences Between Medicaid and Veteran’s Benefits
Public benefits (such as long-term care Medicaid and non-service-connected disability benefits for wartime veterans or his or her surviving spouse) are “means-tested”. In other words, the government looks at your resources when you apply to determine if you are eligible for the government to help pay for care. Usually the most valuable resource that does not “count” is your homestead. However, the definition for a homestead to not “count” depends on the public benefit being sought.
Long-Term Care Medicaid Definition of “Home”:
Under long-term care (nursing home or care at home if skilled care is needed) Medicaid rules, a home is a structure in which a person (or the person’s spouse) lives (including mobile homes, houseboats and motor homes). All land adjacent to the home (provided it is not separated by an intervening property owner) is also considered part of the home. Thus, under long-term care Medicaid rules, a home could consist of hundreds of acres, as long as the Medicaid applicant has an ownership interest and resides in the property while having that ownership interest prior to applying. If the Medicaid applicant is single, he or she must sign a form that says the applicant intends to return home. If the applicant is married, this is not needed if the spouse (or a dependent) lives in the home. Typically, the state looks at the property tax statement to confirm the applicant is treating his or her interest in the property as a homestead. The state may also look at federal income tax returns, federal benefits or voter registration to determine if the homestead is the applicant’s principal place of residence. In year 2024, the equity limit for an applicant that is single is $713,000. This amount increases annually. There is no equity limit if the Medicaid applicant is married or the applicant has a child under 21 or if the child is blind or permanently and totally disabled.
Caveat: A home in a revocable living trust makes the resource “countable” under the Medicaid rules (even though it is treated as a homestead under the property tax laws). As a result, the property should be deeded out of the trust to the applicant and/or his or her spouse to re-establish the property as a homestead that is the applicant’s principal place of residence. Property placed for sale (including an out-of-state homestead) is excluded as a resource.
It should be noted that since the homestead is often a non-countable resource, many (prior to applying for Medicaid) pay off any mortgage and/or make repairs to the home and/or pay taxes or insurance (on the homestead) in advance to reduce countable resources to the resource limit so the government will help pay care costs.
Also, the homestead is subject to Medicaid estate recovery to the extent Medicaid benefits are advanced. There are several exceptions to a successful claim ranging from the Medicaid recipient being survived by his or her spouse, disabled child or child under 21 to having a transfer on death deed or an enhanced life estate (Ladybird) deed.
Veteran’s Benefits Definition of Home:
Many military veterans (or their surviving spouse) are entitled to a payment which helps pay for care if the applicant (called “claimant”) needs to be in an assisted living, memory care or nursing facility or even if the veteran (or their surviving spouse) is homebound. This benefit to wartime veterans (or their surviving spouse) is applicable even if the disability is not connected to their service during wartime.
However, this benefit is also “means-tested”. Usually, the primary residence or home is the most valuable non-countable resource of a claimant. However, its definition of a primary residence or home for exclusion is different than Medicaid. The value of a claimant’s primary residence including 2 acres of residential lot area in which the claimant has an ownership interest is excluded. There is no equity limit on the primary residence. If the residential lot area is greater than 2 acres, then the additional acreage must not be marketable to be excluded as a resource.
In instances where the residence and the place of business are the same, VA will consider the value of residence and the business asset separately (the business would count).
If claimant lives on a farm which is not used for business purposes, VA will exclude the value of the residence area up to 2 acres and consider the rest of the farm as an asset unless there is proof that the extra acreage cannot be sold (and then it may permit a larger lot size to not count).
Unlike Medicaid, VA does not attempt to get reimbursed for benefits advanced.
However, under both the Medicaid and VA rules, if the homestead is sold during the applicant or claimant’s life, it could result in loss of eligibility if the cash proceeds are over the eligibility limits. As a result, there is often planning by the use of various irrevocable trusts so that eligibility is not lost.
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