Home ownership and Medicaid eligibility

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Q. My mother is tenants in common with rights of survivorship on my home, and she also owns her home. Would this be a problem with the Medicaid lookback rules because it is my principal residence and wasn’t a gift?
— Figuring it out

A. Medicaid eligibility and lookback rules are complex, so we’re glad you’re asking.

Start by checking the deed to your home.

The co-ownership is either tenants in common or joint with right of survivorship but not both, said Yale Hauptman, an estate planning attorney with Hauptman and Hauptman in Livingston. Hauptman said.

He said “tenants in common” means if she dies, her interest will pass by way of her will, or if she has no will, by state intestacy laws.

“Joint with right of survivorship” means her interest passes by law to the surviving co-owner, he said.

“This means that if you have siblings and your mother’s will states that she leaves everything equally to her children, tenants in common would mean that your siblings would own a part of your home upon your mom’s death,” he said. “That may not be what you and your mother intended.”

If your mother co-owns your personal residence with you, it is a potential problem for Medicaid.

“Since she owns her own home which she makes her personal residence, the one she owns with you is a countable asset for Medicaid eligibility purposes,” Hauptman said. “Transferring her interest in the home to you would avoid Medicaid spend down rules, provided that she does this more than five years before applying for Medicaid so as to avoid the five-year lookback.”

Another alternative to avoid the Medicaid issue may exist but we would need to know more about how your mother came to own a part of your home, Hauptman said.

Did she help you with the purchase of the home by giving you money for a down payment? Did she co-sign a mortgage that helped you fund the purchase?

“If neither is the case, but rather you simply `gifted’ to your mother a part interest in your home, then she can regift it to you,” Hauptman said. “That should not be a problem when she applies for Medicaid as long as this can be documented.”

However, if the reason for her name on the deed is that she contributed financially in some way to help you be able to afford the home, then her transfer to you of her interest would be a “transfer for less than fair value” and would cause a Medicaid penalty — unless the transfer falls outside the five-year lookback, Hauptman said.

Also be aware that if there is a mortgage and your mother is a mortgagor, the bank would most likely need to approve the transfer, Hauptman said. Transferring her interest without approval could trigger the “due on transfer clause,” meaning you would then have to pay the entire balance immediately.

Email your questions to moc.p1526915495leHye1526915495noMJN1526915495@ksA1526915495.

NJMoneyHelp.com presents certain general financial planning principles and advice, but should never be viewed as a substitute for obtaining advice from a personal professional advisor who understands your unique individual circumstances.