You can no longer live on your own and you have decided to move in with one of your children. Before you move in with your child, you should have discussions with them regarding the living arrangements. If your child is married, it is also a good idea to have discussions with their spouse. Make sure that both your child and their spouse are on board. If either of them is not, it can really put a strain not only on your relationship with your child and/or their spouse, but also on your child’s marriage.
You want to make it clear what you expect from your child and/or their spouse. There may be a difference of opinion as to the type of care that is provided. You may expect your child and/or their spouse to be there for you at all times and be the only caregivers. However, your child may have expectations that they would be able to take a break from you. They will most likely want to bring in other caregivers on occasion so that they can go out, maybe even on a date with their spouse.
Also, is everyone you want to see welcome in your child’s home? What if you have a child or grandchild who is a drug user and/or pilferer? Does your caregiver child or their spouse want these family members in their home to possibly engage in illegal activities or take their stuff? You do not want your moving in with your child to create family discord. Remember, it is your child’s home and you are their guest.
What happens if you make payments to your child? For example, their home might not be big enough, so they need to add a bedroom and an accessible bathroom to accommodate you. Because your child does not have the money for the remodeling, you decide to use your funds to pay for it.
Let’s say your child then quits their job so that they can take care of you. To make up for their lost wages and to help out with household expenses, you decide to make payments to them each month.
At some point in time, you need round-the-clock care and it becomes more than your child can handle. You then go into the nursing home but you have no money left to pay for it because you spent it all on the remodel and/or in payments to your child.
This scenario occurs on an all too frequent basis. Unfortunately, if you do not consult with an elder law legal specialist prior to moving in with the kids, you can have unintended results. In the situation described above, you have no money to pay for nursing home expenses, but there could be a substantial period of time in which Medicaid would not cover the nursing home expenses because of the payments you made to your child.
When you paid for the improvements to your child’s home, those payments were essentially a “gift” to them. Gifts are considered divestments that will disqualify you from Medicaid to pay for nursing home expenses for a period of time. Let’s say the improvements cost $30,000. When you enter the nursing home within 5 years of the payments, that $30,000 gift to your child must be reported as a divestment. That divestment would result in a divestment penalty period.
To determine the divestment penalty period, you divide the $30,000 divestment by the average nursing home cost in Michigan which is $6,618 in 2010. This would result in a 4½ month penalty period. Your children would have to private pay your nursing home expenses for 4½ months before Medicaid would pick up your nursing home costs.
What about the payments from you directly to your child? The likelihood is that you did not properly document your agreement with your child in a comprehensive written personal care contract that was approved by your doctor. If this is the case, those payments by you to your child could also be considered divestments which would result in a divestment penalty period if you apply for Medicaid to pay for nursing home care within five years of those payments. What are your options?
One option would be to enter into a properly documented personal care contract with your child. We covered the requirements of a personal care contract in a previous column. Payments made pursuant to a properly documented personal care contract are not considered divestments for Medicaid purposes.
Another option is to sell your home and then purchase an interest in your child’s home, so that their home is now also your home. When you make improvements to the home, you are making improvements to your own home and consequently, the payments would not be considered a divestment which would trigger a penalty period. Upon your admission into the nursing home, your interest in your home would be an exempt asset. Also, instead of making monthly payments to the child, you could use your funds to pay for household expenses because you would just be paying expenses for your own home.
But you shouldn’t purchase an interest in your child’s home if you can’t sell your home. You can only have one home that is exempt for Medicaid purposes. In that case, you could loan your child the money to do the improvements to their home in exchange for a Medicaid qualifying promissory note.
Medicaid qualification rules are complicated and we have only touched upon some of the rules today. Do not try this on your own. It could result in months of Medicaid ineligibility and substantial nursing home expenses for your family. The best thing for you to do is, prior to your child providing any services to you or moving into their home, consult with a knowledgeable elder law legal specialist who can assist you with your situation.
If you want to stay out of a nursing home by having your kids care for you in their own home, you can. And you should be able to do so without creating any burdensome penalties if you eventually do enter a nursing home.
By: Matthew M. Wallace, CPA, JD
Published edited October 17, 2010 in The Times Herald newspaper, Port Huron, Michigan as: Sharing home with child not to be taken lightly