Can our parents house be transferred to my brother penalty-free since he's lived there for two years?
Recently my 78 year old mother had a stroke which required a week hospital and two weeks in a nursing home. While she is currently living at home with my 76 year old father and my brother. My brother moved in with my parents about 3 years ago. While he originally moved in because of his own marital and financial problems he has essentially has been assisting both of my parents. My father fell last May and after a week in the hospital was able to return home. The injuries from his fall have limited the amount of care he can provide for my mother. My parents live primarily on social security and a small pension totaling about $1600 per month. My brother doesn't pay rent but does provide his own food and utility help. The house was recently paid off and I would estimate is worth about $115,000.
I do not live with my parents, but have been asked to help them with the estate planning. Both parents have wills and I am having them reviewed to ensure they have live directives. I am also working on power of attorneys and getting on their one savings account as a signature authority. The saving account has very little in it and is mostly so that they can cash checks.
I looked into establishing a trust, but was told that with the small amount of cash assets this would not make sense. The penalty of transferring the house into the trust with know other assets to assist with nursing home care would put them in a very difficult situation.
I was told that the house could be transferred to my brother without penalty for Medicaid since he has lived there for over two years and provided care that has allowed my parents to stay in the home. Is this true? If so how is the decision made that the care he provided allowed them to stay in the home for a longer period.
I don't want to put my parents in a worse position and also want to be conscience of my own situation. I would be hard pressed to provide much in the way of cash support.
My parents want to ensure that the house goes to me and my brother. My only concern is making sure that if one parent goes to a nursing home before the other that both can be taken care of.
Expert Answer
You are being very prudent to make sure that your parents have Wills and Durable Powers of Attorney that are in order. They should also have advance care directives for health care.
You are correct that if they were to try to protect their home and assets from being considered in a future determination of eligibility for Medicaid should one or both of them have to go into a nursing home, they would have to have had the trust in effect for five years before either would be eligible for Medicaid.
However, you also are correct that there is a caregiver child exception within the Medicaid rules that permits people to convey their home to a child who has lived with them and cared for them for the two years preceding their going into a nursing home without any disqualification.
It is not necessary to do the transfer of the home to your brother at this time. Neither of your parents may need to go into a nursing home and to transfer the home to your brother at this time would not appear to be what your parents would wish to do now. However, it will remain an option in the future so long as your brother lives with them and aids in their care for the two years prior to one or both of them going into a nursing home. A letter from their physician usually is sufficient to indicate that his care enabled them to stay home rather than go to a nursing home earlier.
I suggest you contact an elder law attorney to discuss this in detail, but think that you should be able to protect the home even if both end up in a nursing home.