How to grant a lifetime estate in a property?
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How to grant a lifetime estate in a property?
My wife and I (in middle 70’s) have a 48 year old bachelor son who has resided in our household since birth. We also have 2 daughters, who are married and have their own households. We want to leave our estate equally between our children except that we want our son to have lifetime dowry to reside on the premises. Can this be done and, if so, how will dowry be affected if we go to nursing home and run out of money? We have Medicare.
Asked on October 26, 2012 under Estate Planning, Tennessee
Catherine Blackburn / Blackburn Law Firm
Answered 8 years ago | Contributor
This is a very thoughtful question, and it raises the essential issues facing many seniors today. The bottom line answer to your question is, you can easily accomplish your goals and you must have a qualified lawyer do it.
Having said that, it is equally important that you understand the general principles that allow you to achieve your goals. You have every right to understand the best method of achieving your goals and why that method is the best. If a lawyer you consult does not explain these things, get a different lawyer. This kind of planning requires knowledge and thought, but it is not mysterious. You pay lawyers well to prepare the right plan for you, and you deserve to understand it.
In general, different states have different laws concerning the ownership of real estate, the transfer of real estate, and especially qualifying for Medicaid benefits in a nursing home. I practice in Florida. I make sure my Florida clients meet the qualifications. If you live in a different state, the specific qualifications may be different.
First, Medicare is not a good payment source for nursing home care. This is a common, almost universal, misunderstanding. Medicare will pay for rehabilitation in a nursing home for a limited number of days (up to 100 days). However, to qualify (and this is a federal qualification not dependent on state law), the beneficiary must have been admitted to a hospital for at least 3 days. (Be careful - there is a trend these days to put Medicare beneficiaries in a hospital for "observation," even for 8 to 10 days. If you see "observation" on a senior's hospital records, you need to look into this as it will cause problems if that senior requires rehabilitation after the hospitalization.) So, the first qualification for Medicare payment in a nursing home is a "3 day qualifying hospital stay."
The next qualification is a need for skilled nursing care or rehabilitation. If those qualifications are met, Medicare will pay 100% of the costs for 20 days. If the beneficiary continues to require skilled or rehabilitative care after the first 20 days (and the beneficiary must be making progress to qualify), the beneficiary must pay a daily co-insurance amount ($144.50 per day in 2012) for next (up to) 80 days.
You can readily see that Medicare is not a good source of payment for nursing home care. Most nursing home care is "custodial" care - help with activities of daily living. A nursing home resident must find a different source of payment for this type of care.
The first source of payment for custodial nursing home care is private pay. If the nursing home resident has funds, they can pay for their care. However, the average cost of nursing home care in Florida in 2012 is $241.38 per day. That amounts to $7,241.40 per month and $84,965.76 per year. You can easily how private funds can be exhausted quickly.
Then there is the question of "how does the non-nursing home spouse (the "community spouse") survive if it costs $85,000 per year" for nursing home care?
This brings up the current reality of nursing home care for most people. Most people must rely on Medicaid to pay for extended custodial care in a nursing home.
Some people have long term care insurance that will pay for all or a portion of nursing home care. Some LTC insurance policies will also pay for care in the home or in an assisted living facility (ALF), and you definitely want this benefit. If you have assets (savings, retirement funds, etc.), it is a good idea to talk with several insurance agents who sell LTC insurance to see if a specific policy is affordable and right for you. There are substantial differences in policies and premiums have been increasing lately. If you qualify for a group plan, be sure to check into the benefits and costs of that plan.
Whether you have assets or not, you should understand how Medicaid can pay for nursing home care. Medicaid is a "needs based" program. To qualify for nursing home care, a person must require the level of care provided in a nursing home and have very limited assets and income. In Florida, a person can have no more than $2,000 in assets and $2,000 in monthly income to qualify for Medicaid nursing home benefits.
But, don't panic. There are many ways that an Elder Law attorney can help seniors qualify for Medicaid benefits. An Elder Law attorney can help preserve assets so that the community spouse is not impoverished. An Elder Law attorney can help preserve assets so that the nursing home resident has funds to pay for the things that Medicaid will not pay - such as private duty care, extra therapy, personal toiletries, clothing, entertainment outside the facility, etc. These methods are completely legal and approved by the federal and state governments. Believe me, the State authorities go over them with a magnifying glass and make sure they meet the federal and state criteria. No one is cheating, and no one is "hiding assets."
In fact, the very worst thing any senior can do is attempt to "hide assets." If you read and understand nothing of this answer, please understand that you should not give your assets away in order to qualify for Medicaid. (I am not talking about Christmas gifts - you know what I'm talking about). The federal government passed a law, and every state has implemented it, to "look back" 5 years to see if the person applying for Medicaid has given away money or assets. If so, they may be ineligible for Medicaid benefits - even if they don't have the money to pay privately for care. This is a terrible result and the biggest reason that I counsel seniors to see a lawyer about their life and estate plans.
And now, back to your first question - can you give your son lifetime use of your home with the remainder split between all your children? Yes, you can. And, your lawyer should do this in a way that leaves an option to qualify for Medicaid nursing home benefits if one of you needs them. There are ways to accomplish your goal and preserve the Medicaid benefits option.
Florida has some very favorable laws about a homestead, and, at least right now, those laws apply to qualifications for Medicaid. However, if seniors deed their property to their children, they lose access to those favorable laws. Even if they "put their children's name on the deed," they lose access to those favorable laws. Putting a child on the deed in Florida may force a sale of the home to pay for nursing home care. In this way, the senior loses the home and the child loses the home. Thus, I am careful to counsel seniors to consult an Elder Law attorney before making changes to the homestead deed.
I hope this answer has been helpful. It is not possible to explain all of the details and ramifications raised by your question in an internet answer. It is not my intention to frighten anyone. It is my intention to inform people, especially seniors and their families, that taking action without consulting knowledgeable professionals is a bad idea that can have catastrophic consequences.