Q: Is there any way to protect a family property from a potential Medicaid claim in MN? what are options for transferring?
This is a lake property. In past years we ran it as a resort. For 20 years I worked (unpaid) at the resort. I feel I have a vested interest in the property. My parents want to transfer the property to me and move to senior living. We met with an attorney. She gave us two options. My parents could gift the property to me now. That could present tax concerns if I ever chose to sell the property. Also there could be issues with Medicaid for 60 months. Or, we could put it in a trust and transfer on death. The issue with this, is that my parents want me to own it now and assume all expenses. The home needs significant repairs (septic, pump, windows, siding, etc. I am concerned I could put many thousands of dollars into the home when I don’t own it, if there is a Medicaid claim I would be out the money I invested. The attorney recommended we do a line of credit between my parents and I - but couldn’t answer what would happen if both Medicaid and I have a claim. Who would be paid first?
A: An irrevocable trust that does NOT reserve to the settlor the ability to change beneficiaries but it still classified as a "grantor" trust, the assets of which are includable in your parents' estate, would solve your problem with respect to ensuring you get the property eventually and don't lose your investment and get the step up on basis at death. Experienced elder law attorneys know how to do this.
You would still be facing the Medicaid 60 month lookback period; that is unavoidable. So, yes, if your parents don't have the funds to private pay through whatever remains of the 60-month period when/if they need nursing home care, you might have to foot that bill through the end of the 60-month period. You need to factor that in to your investment decision.
Regarding "who gets paid first", that is the wrong question. If you do this right there will be NO Medicaid lien because you will prevent your parents from applying for Medicaid until after the 60-month lookback period is expired.
This answer is based upon general principles of Medicaid law. Laws in individual states may vary. Contact an experienced elder law attorney in your area for particulars.
Joshua Damberg agrees with this answer
A: I would agree with much of what Attorney Whitehurst set forth in the response above regarding the 60-month lookback period and private pay ramifications, with one caveat (referenced by Attorney Whitehurst in the closing sentence). Minnesota has specific rules that are applicable to Irrevocable Trusts which have removed this type of planning tool from many Minnesota-based Elder Law practices. Medicaid in Minnesota is called "Medical Assistance" so that is what I will reference it as below.
Specifically, the Eligibility Policy Manual 188.8.131.52.7.9.2 states that Irrevocable Client-Funded Trusts (or Self-Settled/First Party Trusts) created after July 1, 2005, are analyzed as Revocable if the person is requesting Medical Assistance for Long-Term Care Services. Under this analysis, the assets held in the Trust would be deemed available and either make your parents ineligible for Medical Assistance or be recoverable from following your parents deaths. The MN Department of Human Services has also developed policy which demonstrates that they intend to seek recovery from Client-Funded Irrevocable Trusts regardless of being established beyond the five-year lookback period. MN DHS relies upon Minnesota case law stating that self-settled Trusts that contain certain spendthrift language are void/unenforceable because they contain improper anti-alienation clauses. Basically, this is a bunch of legal terminology stating that Minnesota may not recognize the type of Trust that Attorney Whitehurst is referencing and MN DHS may in fact ignore the five-year lookback period if a person sets up this type of Trust with the intent of qualifying for Medical Assistance.
Some attorneys in Minnesota may still have Irrevocable Trusts with language that attempts to differentiate from previously litigated Trusts, but it is a little bit more of a gray area in Minnesota than in other states.
This analysis is very fact specific, as it changes depending upon your parents health, the value of the asset in question, and the other assets that your parents have. I would suggest potentially getting a second opinion from an additional Minnesota Elder Law attorney in regard to this issue. It is more complex than can be fully addressed via an online platform. From a basic MA planning perspective, I do believe there are other transfer options that could protect all or a portion of the value of the property which are not referenced above (such as a transfer reserving a Life Estate for your parents).
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