Q. My 88 year old father still lives in his own home, alone. We worry about him falling and injuring himself. My husband and I have suggested that we sell both of our homes, and together purchase a larger home for all of us. He is on Medi-Cal and we wonder whether he could retain his Medi-Cal once he sold his own home. Any other considerations?
A. Your plan is both commendable and “doable”, but needs to be thought through carefully. Here are some of the considerations:
Medi-Cal Eligibility: Once he sells his home he will have significant cash proceeds, which would normally make him ineligible for Medi-Cal by reason of the $2,000 resource cap for a single individual. However, Medi-Cal allows a six month grace period between the sale of one home and the purchase of another before the proceeds are counted. There should therefore be very clear documentation that the sale proceeds have been set aside, and are being held, for the purchase of a replacement home. Also, your father must receive an ownership interest in the new home equal to the value of his contribution and this interest must reflect on the deed.
Medi-Cal Estate Recovery: To avoid Medi-Cal “payback” upon his death for benefits received during life, his interest in the home would need to pass to his designated beneficiaries without probate, e.g. via a Living Trust or other non-probate transfer. Make sure that he creates an estate plan which does this.
Plan For Disposition of His Interest Upon His Demise: If you and your husband are his only estate beneficiaries, then the job is easier. But if he has other children whom he would wish to share in his estate, then the matter becomes tricky. You may need to come up with a plan to value and purchase back his interest in your joint home when he dies, so that his other beneficiaries may thereby receive their fair shares of his estate. Also, there may be property tax implications to you, depending upon how this plan is arranged.
Co-Tenancy Agreement: It might be wise to create an agreement, setting forth your respective responsibilities for home repairs, mortgage payments, utilities, insurance and use of the common premises.
Anticipate Sale or Need to Borrow: You should anticipate future events, such as your desire to sell the home one day, or to borrow against it for major repairs, college expenses for your children, or other needs. If he is then unable to sign transaction documents, you could be in a pickle. So, make sure that he creates a Durable Power of Attorney (“DPOA”) with comprehensive powers and that both this DPOA and Trust are in sync and allow for such events.
Plan for His Future Care Needs: What if your father later needs to move to an Assisted Living Facility (“ALF”) or Nursing Home for care that you cannot provide at home? How will that care be financed? Remember: Medi-Cal generally does not cover the cost of care in an ALF. Will you commit to buying back his interest in your home in order to create funds for his care?
These are just some of the considerations that would be in play. Essentially, you will need to think through this joint venture and anticipate change as you go along. To facilitate your good intentions, your father will need a solid estate plan which anticipates his possible incapacity, his need for higher levels of care in the future, and which fairly divides his estate upon his demise. To assist in this effort, it would be wise to engage an attorney with special skill in working with elders.
References: The six month Medi-Cal grace period for sale and repurchase of a home is found in 22 Cal. Adm Code 50426
If your father were also receiving Supplemental Security Income (SSI”), the grace period would only be three months. 20 CFR 416.1212(e).