My mother is in a nursing facility long term. She is sole owner of her home. She has a heloc loan on the amount of the home and has used most of equity on the loan.Who has priority in retrieving the money, the state to pay back their coverage medicaid payments or the bank for the heloc loan.
Mom is still alive and continues to own her home?
If the above are correct, here's what's probably happening & its going to be a bit long but to me its important that you understand what's what…...by mom going onto Medicaid, she must comply with Medicaid rules which require that all her monthly income must be paid to the NH less a small personal needs allowance. Her income is her SOC (share of cost) or her co-pay required by Medicaid. PNA varies by state from $ 35 - 105 a mo. (for my mom in TX it was $ 60 a mo). If your mom has made the NH her payee for income, the PNA should be placed in a personal trust account at the NH and she / her DPOA or the NH can withdraw from it to pay for whatever incidentals that Medicaid does not pay for (most often this is cable, phone). PNA is kinda the only flexible $ that mom will have from now till she dies as long as she is on Medicaid; and PNA really it is designed to pay for beauty/barber shoppe and some toiletries/clothing replacement for her at the NH.
Mom will have no-none-nada of her income anymore to ever pay on anything house. So that HELOC, utilities, insurance, property taxes, credit cards, etc. will either need to be paid by family from day 1 of Medicaid or goes into default for whatever debt exists.
Mom's house can remain an exempt asset for her lifetime under Medicaid rules. Which sounds all terrific. BUT MOM WILL HAVE NO $ TO PAY ON HOUSE. So someone in the family - if they want to keep the in her name house - will need to pay everything on the house from now till mom dies and then through whatever period of time for probate &/or dealing with MERP (estate recovery). Whether or not you or other heirs can qualify for MERP exemptions, exclusions or other ways to get the release of the states claim or lien on the property totally depends on your situation. But whatever the long-view for the property, you will have to pay the HELOC, taxes, insurance, etc. till whenever.
Did anyone explain to you or mom about MERP? You can google MERP for your state and it should be on your states Medicaid site as to how it is done.
Keeping a parents home can be done but imho only if the costs are manageable for your wallet, the home is empty (so costs paid are exclusions) and you have the ability to keep meticulous records on all costs paid and have really good sense of humor and don't mind risk. Its like having a 2nd or 3rd home but without guarantee of ownership. To me having any sort of mortgage, just takes the home over the tipping point. Mortgage & Heloc aren't going to overlook or work with you on a late payment like local water company might.
Based on posts on this site, families are often surprised by the required SOC.
So think carefully if the house can be kept for possibly years.
Often families are all gung-ho on "govtmint not gonna take grannies house" for a short few months and then are unwilling to pay/do whatever costs or work promised (like yard upkeep). So the house gets placed on the market; sells & pays off any mortgage and the rest of the $ takes mom over Medicaid limits so mom becomes private pay at the NH and does a spend-down till she is once again impoverished to qualify for Medicaid. If you have been paying on house costs, it is going to probably be very VERY difficult to get reimbursed for any $ you or other family paid on the house from the proceeds of the sale as Medicaid tends to view that as "gifting" of $ from mom to you - which is not allowed - & that you paid for whatever on the house under a sense of familial duty to your mom.
Now some states do allow for a diversion of monthly income for a limited period of time to pay on a mortgage IF the property is currently for sale under Realtor contract. So no FSBO nonsense. Like for TX this is done by applying to HHS for "Mandatory Benefit Optional Benefit" form H1280 (yeah really it reads benefit twice…) that allows for a specific amount of $ for diversion from the SOC to pay the mortgage. It does not allow for a diversion to pay for insurance, taxes or repairs or yard work. I think it can be done for a maximum of 6 months & its not automatic but has to be applied for with documentation as to the debt. I'd be somewhat cautious on this part cause if you have to get pay-off verification from the lender, they may decide to call in the loan if residing in the home is required under the terms.
So really try to pause and do a hard costs evaluation on the home and what it would realistically sell for and think if there would be MERP exemptions or other items such that keeping the house makes sense. Good luck!
so lets say mom continues to keep the house and you have been paying the whatevers on it. When she dies the house goes from an exempt asset of her person to an non-exempt asset of her estate. You probably are going to have to open probate to deal with selling the house and settling whatever claims or liens on her estate by Medicaid.
If the Heloc still isn't paid off by then (horrors!!), they would be a secured creditor against the asset of mom's estate. They will likely be expecting to continue to be paid as per the terms of the loan till probate is settled. Mom being on Medicaid was impoverished and the only after death assets she could have would be the house and a life insurance policy IF the beneficiary of it was her estate. Somebody is going to have to pay all the costs on her estate through this period of time, usually it is whomever is named executor as per your parents valid will.
Medicaid - through MERP - would be an unsecured creditor against her estate. The HELOC would be a secured creditor. Everybody has to follow whatever probate rules are for your state in order to be paid as a creditor & have probate done correctly.
If you or other family have claims against mom's estate, you can file as a creditor as well. How creditors are paid depends on your states administrative code. Like for TX, probate is a Level of Claim state with claims being paid by their Class. Mortgages, executor costs, funeral costs are class 1 - 3 claims. MERP is a class 7 claim and gets paid only after the higher Class 1 - 6 claims are worked through. The terms of the will also get involved in all this as property placed into a testamentary trust could be outside of recovery depending on just how the will was done.
Really its a lot to think about and evaluate. Keeping and transferring a parents home can be done but will not be simple. Good luck in whatever your decision is.
Street, this is not my area of expertise, so I'm only sharing bits of information that I've seen others write on these issues. I believe there are methods of putting the sale proceeds into a trust which would be used for nursing home payments. Igloo, is this accurate?
I emphasize that I've only read about this on the forum; it is not something which I have researched, but it is an issue which should be discussed with a elder law attorney with experience in Medicaid planning.
I think SNT are great if there is a good bit of $$$. But it may not be worthwhile if there is not that much $. If its 10 - 40K left, that could easily be spent down within a mo or two by paying for care and getting dental work done or getting a specialized wheelchair or doing a pre-need fully paid funeral or buying other higher cost medical equipment. Trusts have costs to be set up and to be maintained and then when defunded. An SNT under Medicaid have it so that any funds left go to the state, so of no benefit for family. I'd imagine that stops cold much interest by families to do them.