As published in the Houston Chronicle, Senior Living Section, September 23, 2009

Learn how Medicaid defines ‘home’

By Wesley E. Wright and Molly Dear Abshire

It is hard to imagine anything more dear to the heart of the average Texan than the family home. Our home is truly our castle- the fiefdom over which we reign supreme.

Often the most prized and valuable of all our possessions, it is the one thing we aspire to pass down to our heirs.

Historically, the sacrosanct nature of the home has been inherent in Texas law, which grants certain protections to the home in matters of bankruptcy and litigation.

Despite the above, recent changes in Medicaid rules are beginning to erode Texas’ long-standing homestead protections.

Federal Medicaid law provides an individual is entitled to one homestead valued at $500,00 or less, which will not count against him/her when applying for nursing home Medicaid.

But there is some confusion over how the term “home” is defined for Medicaid purposes. Moreover, in 2003 the Legislature enacted a Medicaid estate recovery statute. Under the estate recovery program, the home is still an exempt asset for Medicaid eligibility purposes, and when the Medicaid recipient dies the state may file a claim in probate court against the home for the amount of certain long-term-care services paid by Medicaid on the decedent’s behalf after age 55.

Federal Medicaid law defines the home as property that the individual owns and that serves as his/her principal place of residence.

In the past, an individual in a nursing home who did not own a home could spend down his/her liquid assets to the Medicaid limit by investing those assets in property he/she would designate as his/her home.

Recently, however, the state Medicaid agency has taken the position that property cannot be an exempt “home” unless the individual who purchases it has lived there at some point. As this position seemed to fly in the face of the federal law, a lawsuit was filed against the state Medicaid agency in Texas on behalf of James W. Seffer. Seffer’s attorney, W. Bailey Barton, argued Medicaid law allows one exempt homestead without any requirement for prior occupancy.

He further argued that the requirement for prior occupancy is inconsistent with other Medicaid rules relative to the home, specifically the one that allows a Medicaid recipient in a nursing home to sell his/her home with the proceeds being an exempt asset for three months, provided those proceeds are invested in a new home within that time period.

Judge Stephen Yelenosky of the 345th District Court in Travis County, Texas, ruled in favor of Mr. Seffer, thus effectively striking down the prior occupancy requirement.

The above court decision would seem to have settled the matter. However, the federal Medicaid agency has instructed the state Medicaid agency to ignore the above-mentioned court ruling. Thus, both the federal and state Medicaid agencies continue to operate off the assumption that property cannot be an exempt “home” unless the individual who purchased it has actually lived on the property.

So where does this leave us? It seems elder law attorneys may be forced into a position of having to file a lawsuit against the state in every situation involving the purchase of a “home” in which the individual has never lived, and to which he/she intends to return upon leaving the nursing home.

This requires extra work for the attorney and unnecessary expense to the family.

Because Medicaid law is so complex, one should never attempt to undertake Medicaid planning on his/her own initiative.

It is essential to engage a qualified elder law attorney who is familiar with the statutes and rules.

Wesley E. Wright and Molly Dear Abshire are attorneys with the firm of Wright Abshire in Bellaire.  Wright is board certified by the Texas Board of Legal Specialization in Estate Planning and Probate Law and is certified as an Elder Law Attorney by the National Elder Law Foundation.  Abshire is certified as an Elder Law Attorney by the National Elder Law Foundation.  Nothing contained in this publication should be considered as the rendering of legal advice to any personís specific case, but should be considered general information.