lamama Asked February 2016
Regarding Medicaid: Can a house be considered a countable asset if it goes into foreclosure?
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When applying for Medicaid, can a house be considered a countable asset if we stop paying mortgage and goes into foreclosure? Father has a house with an outstanding mortgage. Father is in a nursing home and broke enough to get medicaid, but if we list the house for sale I'm told it is immediately considered a countable asset (before it has sold) and we can't afford private pay to the nursing home while waiting for the house to sell. So if we stop paying the mortgage, never list the house, let it go into foreclosure, and the bank reposses it- will there be a penalty with Medicaid?
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But your situation gets messy as its going into foreclosure so there will be no money paid to your dad as there's no traditional sale. BUT - and this is mucho importante - doing the foreclose will likely mean that the mortgage company will issue your dad a 1099-C Cancellation of Debt for whatever the balance of the mortgage was and then whatever foreclosure fees, etc can be added into the closing. The 1099-C is fully taxable income. As it is income, it will take dad over the income / asset limit for Medicaid. Walking on a 300K outstanding mortgage Id bet could be 330K as income. Dad will need to file taxes and do an impoverishment worksheet. IRS 982 I think is the form for this. Also you need to keep all financials on the house as those too can be worked in to offset the income. Its not a DIY or TurboTax project imho, needs to be a CPA or perhaps tax pro at the year-round H&R BLock for business offices.
You have to deal with this also because as its income and so has taxes due on it, if you do not work it out, the IRS can place a hold on part of dad's monthly income from SS and any retirement as IRS is a super creditor. This morphs into a issue for Medicaid as Medicaid requires them to pay all their income as their co-pay or SOC to the NH each month. Having funds seized by IRS stops that ability to pay the required SOC and so they become ineligible for Medicaid.
I don't pretend to know anything about Medicaid, so I write only to the narrow issue of ownership of the house. And legally, the house belongs to whoever holds title to it, until that changes. So even if the house were in foreclosure, your father would still hold title to it until a sheriff's sale. If it were sold instead of foreclosed, he would hold title until the deed is executed (I'm avoiding the semantics of executing vs. recording of the deed).
I have no answers to how you pay for care until either a house is sold or he's qualified for Medicaid; this isn't an area in which I'm knowledgeable. But I do understand your dilemma.
Look up the Medicaid rules for your state. Look up property law in your state. A property with a mortgage is titled to the person on the mortgage & only fully owned when mortgage is paid off and a release of the deed of trust (can be called other things varies by state) issued by mortgage co. This is GardenArtists point & my point in all this. Right now -till it's through the foreclosure cycle - it's dads asset & should be considered an exempt asset for medicaid.
Is dad in the NH as Medicaid Pending?
If not, this could be part of the problem. A NH does not have to take a resident in as Medicaid Pending necessarily. They can place a resident as private pay if upon review of the documents required to accompany the Medicaid application, the NH determines there is going to be a looming transfer penalty or ineligibily or other issue with Medicaid eligibility. A Medicaid applicant is not the same as being Medicaid Pending.
The advantage of being Medicaid pending is that they are only required to pay the copay or SOC of their monthly income to the NH less the personal needs allowance during the processing of the application. PNA varies by state, like for my mom it was $ 60 a mo & her application took about 5 1/2 mos. So if dad lived in TX & gets $ 800 SS & 1K pension, he only has to pay $ 1,740 each mo to the NH and be compliant & ok under medicaid rules. But if he's NOT Medicaid pending, it's whatever the NH requires for payment.
Has anyone described in detail what the SOC & Pending is?
NH know that applications where there is a mortgage is going to be a problem somewhere......there's likely to be issues with getting the NH copay on time & regular as the mortgage gets paid before they the NH do; there's likely to be all sorts of legal & foreclosure mail coming to the NH....; those that walk on a morgage tend to have other credit issues.... If the elders family seem to themselves to be limited financially, there's going to be a problem in getting paid. I'm not trying to be harsh but NH run on a narrow profit margin so a resident that has mortgage /foreclosure /credit issues is high risk for defaulting on co-payments and being ineligible for medicaid. The NH needs them to be private pay as much as possible to reduce their risk.
For Medicaid, All he will have is his PNA as his extra $ each month. PNA ranges from$ 35 -105 depending on his state. It's designed to be able to pay for barber shop, some toiletries & clothing replacement, or perhaps cable or in room phone costs. There will be no -none - nada -zero of his income ever to pay on that house and it's costs anymore. all costs fall on family to pay.
Now some states will allow for a waiver of some of the copay or SOC to pay for the mortgage & some utilities for a limited time. Like for TX it's limited to 6 mos but only available IF physician will sign off on a document that they will return to the home within that period. It is not renewable. The waiver only pays for basic utilities so no phone, or insurance, repairs, yard work. All other costs fall to family to pay or all defaults. That is the stark reality.