How can I set up the child caregiver exemption?

I've never heard of a caregiver exemption. Sorry. Many adult children help their aging parents. Unless the caregiver provides more than half of the financial support for the parent and the parent can qualify as a dependent on federal taxes, there is no exemption. If the parent pays most of the bills, however, the daughter may qualify to be a dependent. We would have to know more about the situation.

SPECIAL CAREGIVER EXCEPTIONTO SAVE THE HOME

FROM NURSING CARE SPEND DOWN

Many people are becoming increasingly concerned about the possibility that they, a parent or loved one may lose the value of their primary residence in order to finance the cost of long term nursing care. In this article we will describe one way that the primary residence could be protected from nursing care spending. Although this is one method for protecting the primary residence, there may be other ways to protect some or all of the value of the real estate using other techniques.

There is a federal statutory provision which is recognized in Pennsylvania that allows for a parent to transfer his or her primary residence to an adult child without any penalty under the Medicaid Asset Spend Down Rules. Typically, an individual will be penalized with a Medicaid ineligibility period should they make gifts withing 5 years prior to applying for Medicaid.

Legal Exception: Even though a gift of the primary residence would typically mean that the person making the gift would become ineligible for Medicaid for up to Five years, there is one prominent exception to that rule. The federal statute provides that a parent may transfer their primary residence to a child without causing an ineligibility period if the following is true: 1) That child resided in the property for at least two years prior to the parent entering a nursing care facility. 2) The child provided care for that parent that kept the parent out of the nursing home for at least the two years prior to entering the nursing home.

Legal Documentation: It is very important that proper documentation be made if this asset protection technique is used. The child to whom the gift will ultimately be made, should keep a log or journal that sets forth specific instances or events that but for the child’s care might have resulted in the parent’s institutionalization. These notations should include aspects of a parent’s behavior that would have necessitated full time nursing care. These might include gas or electric burners not being shut off, water left running in the tub or sink, or the parent wandering outside without being properly clothed and in a way that may be dangerous or medically harmful to him or her.

The child should also obtain statements from other family members or neighbors telling of any events or circumstances that reinforce that child’s position. They should also have documentation from a physician or visiting nurse that would set forth their belief that the parent was only able to remain in the home because of the child’s full time care and that the actions of the child kept the parent out of the nursing home for at lease two years. This record keeping will be a very important aspect of the planning process. As you can image, the Department of Public Welfare will be ambitious in scrutinizing this type of transfer. You must be ready to prove that the transfer was legitimate and fell within the requirements set forth in the statute.

This exception to the ineligibility rules that typically exist will not be available to everyone. However, it should give rise to the possibility of an adult child moving in with a parent in order to prevent them from needing long term care immediately. In turn that child will be rewarded by the ability to retain the parent’s primary residence. Please note that there are other basic exceptions where the primary residence could be protected under certain circumstances. They are briefly as follows: A transfer to a minor, blind or disabled child, or a sibling who has an equity interest in the home and who has resided there for at least one year before the Medicaid applicant became institutionalized and they have retained the property during his or her lifetime.

To discuss Elder law planning options and be secure that they are proceeding properly, it is important that you consult with one of your professional advisors, so that you can review your specific circumstances and determine the best course of action.

Oh, Medicaid recovery and the live-in caregiving child. That is a totally different can of worms. What you wrote is the same things that I know about this exception.

jackkie, You need to do this BEFORE you go on Medicaid. And I hate to tell you this, but in PA, the nursing home will sue you under "filial responsibility" laws. And they will win!! If you want the house, you keep mom at home.

The language you quoted is as much as I know about it, too. From what you said, it sounds doubtful that the mother would need to be in a nursing home if what the daughter is doing for her is cleaning, yard work, and transportation. Inability to do those things would not qualify the mother for Medicaid.

Jackkie - is this the situation.......you live with mom in the home that she owns AND mom already on some type of community based medicaid program OR you anticipate mom will need to move into a facility paid by Medicaid SO you are concerned that the home will be subject to a claim or lien by Medicaid & you are trying to figure out how to get around a Medicaid recoup from a claim or lien on the house???

If this is the case, there are some things to think about:
- Medicaid although a joint federal & state program is managed uniquely by each state. Your in TX? If so Medicaid is done by TXDADS division of TxHHS. Both have website with info on Medicaid rules.
- all states Medicaid program are required to do an attempt of recovery of the costs paid by Medicaid. This is called MERP - Meducaid estate recovery program. Your moms home - which is an exempt asset for her lifetime - will be subject to MERP after her death if mom goes onto medicaid. A full time caregiver can apply for an exemption to MERP.
- as Medicaid is administered by each state, state laws on property, probate, etc will made a huge difference as to just how a Medicaid claim or lien & exemption or exclusions are done. So what happened in PA with the "Pittas" case may not at all apply for case law in TX. TX doesn't hold filial responsibility. For TX MERP the caregiver exemption requires an on letterhead with state registration/credentials from either the elders physician or social worker detailing the specific care needed to be provided & done by the full time caregiver for a detailed time period and submitted within the timeframe set by medicaid / MERP.
- MERP is outsourced in many states. There are 2 main companies that do this (HMS & PCG) and the approach is to me more along the lines of debt collectors as they get a % of the recovery and have tight submission requirements & can place interst on the debt. If MERP is in your future, you kinda need to be at the ready and be organized in record keeping on every cost on the property.

If mom keeps the house till after death, IMHO you need to plan on doing either: a muniment of title if you get a caregiver exemption from medicaid/ merp OR open probate as you will more than likely have Class 1-3 claims to off set, or completely squash or take the estate below the cost effectiveness of a recovery if MERP challenges the exemption so there is a release of the merp claim. MERPs Class 7 claim for TX probate & TX is a level of claim state. Probate you need an atty. But for a muniment you kinda can do this if your comfortable in a courthouse setting.

For family caregivers what often is a very real problem is that it is the elderly parents income (SS, retirement $ & their savings) is what is keeping the household afloat. The caregiver is working /caregiving for free and has little to no income of their own. If elder moves into a NH, Medcaid requires almost all of their income to become their coPay or SOC ( share of cost) paid to the NH. They will have only a small personal needs allowance each month....for TX its $60.

Having the home qualify for an "caregiver exemption" is all fabulous but does no good if you on your own cannot pay all the costs (taxes, utilities, insurance, etc) on the home. If there is a mortgage (horror or horrors!!) that would have to be paid off before you could get ownership. I'm sure there are a lot of caregivers who are beyond the point of caregiving and burnt out but have to continue to do so in order to have a roof over their head which the elder's $ pays for.

So can you totally on your own pay all costs on the property as well as all your other living expenses?

Mom is not on Medicaid Now, and Her Health is good for her age. But I am just trying to protect her assets. She only has her house and car and I do intend to keep her home if it is at all possible. What is your best advice

People are telling me to have her sign her house over to me now

I found some very good information by googling "transfer title home to caregiving child." You have to do this very carefully, because the way it is done can have large tax implications should you ever decide to sell the home. The cost basis of the house will be what the parent paid, instead of the appraised value at the time of transfer. This could create a large capital gain should you decide to sell. Also, you will immediately lose any property tax exclusions enjoyed by your parent. I would read up on the things that will happen based on the timing of transfer and consult with an attorney about the best way to do it, based on what your present and future plans are.

I had a logical jump here that I should explain. If the title is transferred while you mother is alive, then what your parents paid for the house will be your basis. If you inherit the house after her death, the appraised value at that time will be your basis. If your parents bought the house many years ago, the difference can be huge. For example, my parents bought their house in 1949 for $15K. It is now appraised at around $250K. So if the title were transferred to me and I sold it, I would have a capital gain of $235K. Yikes. If the house were transferred to me now, I would lose the low-income senior citizen exemption on the house. She pays no property tax at this time. So in my case it would not make sense to transfer ownership of the house now. It would be better to let it pass down through her will.

JessieBelle - yes! You can't overlook the tax implications.

Jackkie - the folks that are telling you to transfer the house are probably telling you this because they have heard / read / been told an ancedotal story about the government taking someone's grannies house. They are kinda right & they are kinda wrong IMHO. YES Medicaid estate recovery exists. It's called MERP and for TX (your in TX right?) it is done by an outside contractor -HMS. They do MERP for about a dz plus states btw. But NO the house is not always subject to a recovery action. Google TX MERP to get an idea on this. Also there is a blog by Randy Drewitt an atty in big beautiful Beaumont that has lots of good MERP info.

MERP has all sorts of exemptions, exclusions and has to be cost effective for a recovery to be done. All LTC Medicaid and over age 55 community base Medicaid program receipients will get a MERP inquiry or intent done but not all will be subject to a recovery action.

Deciding whether to have mom continue to keep the house in her name from now till death even if she does need a NH and applies for Medicaid and then you deal with getting the caregiver exemption is one possible path. Another path is that mom gifts the house to you right now and you start paying for everything house from then on and increased taxes and hope that mom does not need to ever apply for Medicaid till February 2021 and outside the 5 year look back. Or that you can qualify for 2 years of full time caregiving if mom needs Medicaid before the 5 years has passed. It more a choice of what type of chance to take. The value of the house plays into this....if its a lower value property, the change in ownership may not make too much difference financially.

It sounds like mom is still pretty good independently on her ADL's so you can't get the caregiver exemption just yet. You might want to on the next visit mom has with her MD to ask if MD what moms near future is for him to write caregiving orders for mom.

Also if mom is not paying you for caregiving & she has savings and monthly income to have funds to do this, mom really really needs to be paying you for caregiving. It had to be a legit contract and taxes filed but will not pose an issue for medicaid (if that ever is applied for) but provides for you a lil nest egg to have once mom and her income goes away. I bet there is something with delayed repair at the house and as time goes by will increase.

Do you have the basic legal done for mom...DPOA, MPOA, a will? If not, I'd suggest you schedule an elder law visit get these done or updated and get the care contract done and speak with the atty about the house issue. Also for TX you can get a "guardianship in case of incapacity" starement done, what it does is provide for a simpler way to establish guardianship in case something happens to either of you .....it names yourself and another family member or friend to become guardian. Good in case mom in a fit of dementia pique tells you she's getting rid of you as POA or if something happens to you.

Now is a good time to review costs on house, health etc for 2015 and then look at the 2916 awards letters to see where you both stand for income for 2016. Good luck.

Don't forget, you have a capital gain exclusion of 250,000. It seems like it would be a good idea to buy the house, for $100 or so. No one will pay tax on it if sold within the exclusion period and it would be owned by the child so no Medicaid penalty

Jane00 - as far as getting the child caregiver exemption, it's not automatic just because the son or daughter lives in the parents home that it happens. Perhaps for some states it is. But for TX, getting the exemption requires an on letterhead with state registration & credentials of either the elders physician or social worker a document that states caregiving was necessary and what the caregiving was.

Now whether this is easy or simple to get could be its own problem....... If the elder is on community based at home medicaid paid for services, then they have a state social worker and could get this but for this situation the Medicaid tally won't be huge. BUT for the situation where a home owning parent goes into a NH or AL paid by Medicaid and the son or daughter continues to stay in the house, it's going to be more difficult as it could be years in a facility before they die and years since they saw their old preNH or AL physician so the old MD may or may not do a "caregiver" statement & have the files to review to even do this. I've just found that docs are somewhat loath to do any paperwork that could have "legal" implications as their expertise is medical not legal and add onto this the elder is not their patient anymore & hasnt been so why should they bother to do this.

The OP - Jackkie - wrote that her mom can still do for herself. It sounds like lot of whats happening is companionship rather than caregiving. Mom right now isn't truly needing care that would or could qualify for an exemption. She's likely in a grey area if she had to get the exemption this year.

Whatever decision made runs a risk. I know what I'd likely do in this situation as I'm not especially risk adverse but most of us are.

Someone advised me to have my mother Gift half the house to me as Joint Tenants with right of survivorship. At death of mother, her half automatically belongs to me. If all gifts of the mother are under 5 Million (In calif) there is no tax due on the gift and no having to go through probate.

Senorita, don't forget there is something called a gift tax (nothing to do with age). I don't know how or if it would apply.

Senorita, did someone also tell you that this would make mom's Medi-Cal stop completely? Did they tell you there is a gift tax on the part she gives away now? Did they explain how probate works? That the Executor still has to file reports with the courts, even for a small estate? And they have to file state and federal tax reports?

What are we talking about here-one person mentions exemption and another mentions exception?

Llama - my take on the wording is that it's really dependent on how your state administers its Medicaid program & then also just how your states laws or administrative code interfaces with Medicaid. Like for example some states recovery can place an actual lien on the property but other states recovery is a claim against the assets of the estate & the only asset that exists is the house so it gets the claim.

So categories in which estate recovery (which I've seen called MERP, MERS & RAC) will not be done can be called an exemption, an exclusion, an exception and heaven know what else 50+ entities decide to call it. Plus there's the whole question of what a "recoverable" estate is and how a determination of cost effectiveness is to be done or cost benefit analysts is done (which the Feds require the state to do for a recovery) for a recovery to actually be done.

It's like all things Medicaid...it's a maddening maze as everything varies by state.

Also having something JtWROS doesn't always get around the medicaid debt. It and life estates can be subject to a claim or lien, if a state opts to take a wider view of assets even if those assets should otherwise fall outside of probate (MERP in theory is supposed to be a probate action). Not all states do this but I'd bet a case of prosecco that most will eventually as the LTC Medicaid are huge huge butt costs for state governments.

The caregiver child exception allows a person who applies for Medicaid nursing home coverage to make a penalty free transfer of their house to a child who has taken care of them in the home.

42 U.S.C. 1396p says that:

An individual person won't be ineligible for medical assistance if he or she transfers a home to a son or daughter of such individual who was residing in such individual’s home for a period of at least two years immediately before the date the individual becomes an institutionalized individual, and who (as determined by your State's Medicaid agency) provided care to such individual which permitted such individual to reside at home rather than in such an institution or facility.

www.ssa.gov/OP_Home/ssact/title19/1917.htm

The key is to make sure your mother's doctor is aware that her daughter is living in the home and making it possible for your mother to avoid a nursing home admission. After at least 2 years of this valuable care service provided by the daughter, a letter from the physician should convince the Medicaid case worker that the mother qualifies for the Caregiver Exception, allowing her to transfer the house to the daughter.

It’s always interesting to read the issues that other Agingcare.com community members see in each question. Some community members mentioned income tax issues in answering the question about transferring the house to the caregiver child. Their concerns may be taken care of if the caregiver child becomes the home owner and continues living in the house and decides to sell it after two years. The Principal Residence Exclusion is an income tax law that saves people from paying a capital gains tax on the sale of their home.

www.law.cornell.edu/uscode/text/26/121

John Roberts: The original question arises in Pennsylvania, which has an aggressive Filial Responsibility law enforcement record. (HCR vs. Pittas). Will state law supersede federal law?

And another big question -- would the cost basis of the house be the same if it was transferred before death than if it was inherited after death?

Igloo: Thanks.