Daley/Nadeau Decisions: Protect your Home Equity from Nursing Home Costs

Good news recently from Massachusetts’ highest court.   Your home is your nest egg.   It gives you a place to live in retirement for as long as you need, and then you can leave it to your kids when you die.   But that plan can go awry if you need nursing home care.

Medicaid will pay for your nursing home costs even if you own a house.   So you normally do not need to sell your home right away to have Medicaid start paying your nursing home.  Instead, Medicaid puts a lien on your house.  After you die, Medicaid will file a claim in probate court to collect on its lien, which equals every dollar that Medicaid paid for your nursing home for your care during your lifetime.  Your children will end up only with what’s left after this lien is satisfied.  Nursing homes are very expensive, so it does not take long for the Medicaid lien to eat up all or most of the equity in your home.

One solution is to place your home in an irrevocable trust at least five years before you need nursing home care.  If you do, Medicaid no longer considers you the owner of the house, and will not put a lien on it.   The trust gives you the right to live in the house for the rest of your life, and when you die, the full equity in your house will pass directly to your kids, without the need to go through probate.

In the Daley and Nadeau decisions, the Supreme Judicial Court recently rejected Medicaid’s argument that houses held in these types of irrevocable trusts for five years should still be considered your property simply because you have the right to live there.

Irrevocable trusts are not for everyone.  Once your house is put into a trust, you never have access to the equity if you need it to live in retirement.  But if you are happy to live in your house (or a down-sized house) rent-free for the rest of your life, and have sufficient other property and income to live on besides your home equity, an irrevocable trust is worth exploring with an estate planning attorney.

Conveniently located in downtown North Attleborough, we serve clients from Massachusetts and Rhode Island, especially the communities of Attleboro, North Attleboro, Taunton, Norton, Foxboro,  Norton, Wrentham, Rehoboth, Plainville, Franklin, Mansfield, Seekonk, Providence, Woonsocket, Pawtucket, Cumberland, and Lincoln.

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