25 Jul “Home” Purchased After Buyer Is Institutionalized Counts As Resource For Medicaid
The Texas Supreme Court has ruled that a Medicaid applicant who purchases a home or an interest in a home after admission into a skilled nursing facility is not excluded as a resource for Medicaid eligibility. On the other hand, the Court suggests if the Medicaid applicant purchased a home or an interest in a home and occupied the home prior to skilled nursing admission, then it would be excluded in the resource calculation for Medicaid eligibility.
Long-term care Medicaid is “means-tested.” If you are eligible, the government will help pay for your long-term care and drugs. This is important since the average monthly nursing home care cost is around $7,500. Most have inadequate income or resources or long-term care insurance to pay that care cost. Certain resources count and certain assets do not count in calculating eligibility.
In the case of Texas Health and Human Services Commission v. Estate of Clyde L. Burt (decided by the Texas Supreme Court in May 2024), eligibility of whether the government would help pay for care hinged on the definition of “home.”
Clyde and Dorothy Burt purchased a home in Cleburne and lived there for 36 years before selling it to their daughter and son-in-law, Linda and Robby Wallace. The Burts moved into a rental property owned by the Wallaces and lived there for seven years. The Burts then had to move into a skilled nursing facility.
After they moved into the nursing home, the Burts used cash and life insurance (that are countable resources in determining Medicaid eligibility) to purchase a ½ interest in their former home. If the court determined it was their “home,” then their countable resources would have been “spent down” to create Medicaid eligibility (to help pay for their care). Otherwise, they would not be eligible due to excess resources. The Burts then signed a Ladybird Deed which would have avoided a successful claim for reimbursement against the home if Medicaid eligibility was obtained. The state denied Medicaid eligibility. The Burts died in the nursing home. Their daughter, Linda, petitioned to reverse the state’s position that you have to own and occupy the home prior to institutionalization for the “home” to not count as a resource and to avoid her parents’ estate being liable for their care if not on Medicaid. The trial court and appeals court agreed with Linda since renters and homeowners should have the same rights and needs upon nursing home discharge. The Texas Supreme Court disagreed.
Under Texas law, a “home” is an excluded resource if there is an intent to return home. If the applicant is single or if both spouses apply for Medicaid assistance, then the equity value must be less than $713,000. If married and one spouse lives at home, then there is no limit as it would be excluded as a resource. The Texas Health and Human Services Commission (which administers Medicaid) has taken the position the applicant must also occupy the “home” prior to institutionalization.
The Texas Supreme Court agreed with the Texas Health and Human Services Commission saying the Burts merely declared an intent to make a future home. The Court determined that since federal law does not define “home,” it used the dictionary to determine its definition – “one’s principal place of residence” – not merely a structure in which one possesses a partial ownership stake.
However, the dissenting opinion quoted the federal law which defines a “home” as any property in which an individual (and spouse, if any) has ownership interest and which serves as the individual’s principal place of residence. The majority of the Texas Supreme Court reasoned that to reside and live in a place, one must occupy it with an intent to return home. If federal law requires an “intent to return,” then it rationalized you must occupy the home to have an intent to return to it. However, the Court’s decision is inconsistent with other Medicaid rules. For example, if one owns a home prior to institutionalization and then sells it after institutionalization and buys another home within 90 days, but never occupies it, the new home is still excluded as a resource. Furthermore, a Medicaid beneficiary who flees a home due to domestic abuse without intent to return still has the home excluded as a countable resource. Additionally, if a Medicaid recipient purchased a home from an ABLE account, it would be excluded as a resource without an occupancy requirement prior to obtaining Medicaid. In the case of the Burts, they had resided and occupied the home for 36 years – just not the seven years prior to entering the nursing home. The Burt’s application included a statement of their intent to return home.
The trial court and the Court of Appeals had determined an occupancy requirement denies renters the preservation of a home after nursing home care which would be contrary to Medicaid’s intent to promote a return to independence. Under the Texas Health and Human Service Commission’s argument (which the Supreme Court approved), an applicant can exempt his or her home if he or she lives there for one day before entering a nursing facility but an applicant living in an apartment and in the process of buying a home who, the day before closing, suffers a fall requiring nursing home care cannot.
The Supreme Court’s decision also considered the action of the Burts (or their daughter of converting countable resources to a non-countable resource once care was needed) as deceptive and an “artificial impoverishment” to abuse Medicaid and “saddle future generations with obligations to the few who undertake elaborate estate planning to impoverish their elderly parents.” There is no doubt that if the Burts were successful, then others would use the same technique to preserve resources and accelerate eligibility. However, conversion of countable resources to a non-countable resource is very common in Medicaid planning. For example, if one had $15,000 of countable resources but lacked a pre-need funeral, it is common to simply purchase the pre-need funeral (without right to cancel) in that amount to impoverish the applicant and accelerate eligibility. The Texas Supreme Court indicated that Congress limited improper asset transfer by imposing a “look-back date” to support the position of counting the Burt purchase as a resource. However, as the dissent rightfully pointed, the “look-back period” concerns uncompensated transfers – not transfers for fair market value (i.e., purchasing a pre-need funeral for fair market value). The state never stated the Burts purchased the interest in the home for less than fair market value.
While it is understood that the Texas Supreme Court had the admirable goal of preventing artificial impoverishment, its rationale is often inconsistent with many existing laws.
The Texas Health and Human Services Commission has always taken the position that it would look at cases individually to determine if occupancy and ownership of an interest in a home was intentionally done to reduce countable resources to achieve Medicaid eligibility so that the state would help pay for cost of care. However, while this Texas Supreme Court decision was a victory for the state, it may lead to others simply purchasing an interest in a home and occupying it for as little as one day for it to be excluded so that the state would help pay for long-term care.
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