"Homestead"

The Michigan Medicaid statute provides that the homestead and all adjoining land is a non-countable asset. However, a client may wish to sell this property or convey it to their children. These options and their consequences need to be discussed with the client.

If the medicaid applicant continues to own the homestead in their name alone, the asset is non-countable. However, for it to remain non-counted, the homestead cannot be sold while they are a resident of a nursing home. As a result, someone will be required to maintain the home during this period and pay related expenses. The Medicaid statute does provide that someone can reside in the home in exchange for maintaining the home and paying all expenses. An agreement must be signed setting forth the terms of such an arrangement.

If the medicaid applicant chooses to add a child's name to the property to avoid probate, they need to consider the possible consequences. This could be a divestment resulting in a penalty period, and may also result in the home being treated as a counted asset. While there are some circumstances where this conveyance would be allowed, this should be discussed with an elder law attorney.

Another possible conveyance includes a retention of a life estate or life lease in the property. While this allows the applicant to continue to reside in their home and avoids the need for probate, it will also result in an additional counted asset. There are tables for calculating the cash value of both a life lease and life estate. In addition, if the conveyance was for less than FMV it will be considered a divestment resulting in a penalty period.

It is important that all of these issues regarding the homestead of the medicaid applicant be discussed with the client. Michigan has not yet implemented an estate recovery program, but has been mandated to do so by the federal government. The consequences of estate recovery should also be considered.

Smith Bovill, PC, counsels clients on elder law and Medicaid planning issues regularly as part of its estate planning, probate, and trust administration practice. This letter is intended to be for informational purposes only. We would be pleased to discuss this, or any other Medicaid or elder law issues in more detail.

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