How Does Medicaid Treat Heir Property?
The Estate Planning and Elder Law Firm has been busy analyzing Transmittal #84 to the Medicaid Manual.
Many of the provisions of Transmittal #84, which became effective July 1, 2006 are the result of the passage of the Deficit Reduction Act of 2005, and they are exactly as The Estate Planning and Elder Law Firm has reported in previous editions of the Elder Law News. Because many of the changes in the law will have an impact on Medicaid planning, The Estate Planning and Elder Law Firm will continue to report on the effect of Transmittal #84 in future editions of the Elder Law News. These changes require seniors to think about long-term care planning well before their need for nursing home care.
Some planning opportunities remain unchanged. For example, a recent case presented a common situation in developing a Medicaid asset protection plan for a married couple in Virginia. A community spouse was seeking advice in obtaining Medicaid long-term care assistance for her institutionalized husband who was mentally incapacitated.
The husband had inherited an interest in two parcels of real property: one parcel from an uncle named James, and the other parcel from an uncle named William. Neither uncle had a will or a list of heirs on record. Each parcel of real property had an assessed value of about $10,000. The husband had been paying the real estate taxes on both of these parcels of property for years. The wife knew that her husband’s parents were deceased, and that he had four siblings. She also knew that her husband had at least two deceased uncles, but she did not know if he had any other aunts or uncles. This resulted in the institutionalized spouse owning a fractional interest in the two parcels of real property.
Many people of modest means often die without a will. As a result, their assets will pass to their heirs as provided under the laws of intestate succession set forth in the Virginia Code. Frequently, this will result in a large number of heirs owning a relatively small interest in a single piece of real property as tenants in common. These property interests are often called “heir property.” Unless all of the owners can be located and consent to the sale of this heir property, it can only be sold through an expensive and time consuming court action called a partition suit.
How should the interests of the institutionalized spouse in these two parcels of real property be treated on the Medicaid application? The Virginia Medicaid Manual provides that an undivided interest in real property is an asset. Therefore, the property interest must be reported on the application; however, we do not want the entire value of both parcels to be applied to the community spouse’s resource allowance. The Medicaid Manual provides that if a partition suit is necessary to sell real property because there is at least one other owner, then the estimated cost of the partition suit may be deducted from the property’s value. If the cost of the partition suit would result in the applicant securing title to property that does not have a value substantially in excess of the cost of the suit, then the property will not be treated as an asset. (See Virginia Medicaid Manual Sections S1120.010(C)(2) and M1120.215.)
In the case under discussion, the community spouse was directed to execute an affidavit stating that her husband owned an undivided interest in both parcels of real property with his siblings and other family members. The community spouse then obtained a written estimate of the cost of a partition suit for each parcel of real property from a local trial attorney. Because these estimates exceeded the value of each parcel of real property, the community spouse listed each parcel on the application with a zero value. The affidavit and written cost estimates were attached to the Medicaid application.
The attorneys at The Estate Planning and Elder Law Firm provide valuable assistance to families in planning for their long-term care needs, including estate and investment planning. With the recent changes in the law, advance planning is more critical than ever
ElderLaw News is a weekly e-newsletter that brings you reports of legal developments and other trends of vital interest to seniors and their advocates. This newsletter is brought to you by The Estate Planning & Elder Law Firm, P.C.
If you are interested in having an Elder Law attorney from The Estate Planning & Elder Law Firm, P.C. speak at an event, then please call them at:
Maryland (301) 214-2229
Virginia (703) 243-3200
Washington DC (202) 223-0270
For a review of your financial plan and investment portfolio, contact a financial adviser at Ariba Asset Management at 1-800-808-7488
Advertisement
