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Legal Notes

The risk of real estate transfers

It has been a challenging month for several of the families with whom I am working. In each case, an elderly person transferred real estate to protect it from nursing home expenses and, in each case, it created a mess! Sadly, their stories are common.

Louise was 95 years old, frail, and had no liquid assets, but still lived at home. Last fall, she decided to sell her house to her niece and, since her niece was having financial difficulties, Louise offered to give her a $14,000 discount on the sale price and hold the mortgage. The attorney they met with agreed to prepare the deed and mortgage. The problem? Only a few months later, Louise needed a nursing home and was ineligible for MassHealth benefits, because both the discount and the 30-year mortgage (considering Louise’s life expectancy) were considered gifts. MassHealth imposes a period of disqualification for gifts made within sixty (60) months prior to application, which would jeopardize Louise’s ability to receive care.

Bob had transferred his home to his daughter many years ago, reserving a life estate for himself. The transfer would not jeopardize his eligibility for MassHealth because it happened more than sixty (60) months ago. However, his daughter lives in the house and, earlier this year, wanted to refinance the mortgage. The attorney they met with recommended that Bob, now 85 years old, give up his life estate to simplify the financing process. The problem? Bob is now in a nursing home, has no cash resources, and his release of the life estate will be treated as a gift for MassHealth purposes. His application will be denied.

Last year, Mary and Frank, a married couple, were both in their 90s and Mary was showing signs of significant cognitive decline. They told their attorney that they wanted to add their son to their deed, as a joint owner. The problem? Mary is now in a nursing home and adding their son to the deed is considered a gift (1/3 of the value), so any MassHealth application will be denied.

In all of these cases, there were alternatives which would have ensured that the elder would qualify for MassHealth to pay for nursing home care. It is critical that anyone who is considering sale or transfer of real estate or cash assets inform themselves about potential consequences of the action they are considering, including the impact on MassHealth eligibility. Attorneys knowledgeable about estate planning options, particularly for homeowners, are an important resource to avoid future problems.

The views expressed in this column represent general information. To address your particular and specific needs consult your own attorney. If you need help with referral to an attorney, contact the Franklin County Bar Association at (413) 773-9839 or the Worcester County Bar Association at (978) 752-1311. Elder law resources may be found through the National Academy of Elder Law Attorneys, Massachusetts Chapter, at massnaela.com or 617-566-5640.

Community Legal Aid (CLA) provides legal services free to people age 60 and older for civil legal matters with an emphasis on access to health care coverage (MassHealth and Medicare) and public benefits as well as tenants’ rights. A request for legal assistance can be made by phone at 413-774-3747 or toll-free 1-855-252-5342 during their intake hours (Monday, Tuesday, Thursday, and Friday from 9:30 a.m. to 12:15 p.m. and Wednesday from 1:30 p.m. to 4:15 p.m.) or any time online by visiting www.communitylegal.org.