LEGAL CORNER: Will I lose my home to medical bills?

LEGAL CORNER: Will I lose my home to medical bills?
(Source: KPLC)

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QUESTION: I am the youngest of five children. My Mom appointed me with Medical Power of Attorney when she becomes unresponsive. I am not certain of the best course of action in these situations. For example, if care at home has been given, should she be moved to a facility or remain at home? If in a care facility should she be moved home for their last days? Will 24-hour care become necessary and more medical assistance be required?

ANSWER: You have quite a responsibility entrusted to you. If you are asking these questions, a Hospice service might be a good solution. Hospice can be provided to a person who has a life-limiting illness wherever that person lives. A nursing facility or long-term care facility can receive visits from hospice personnel in addition to the other care and services provided by the facility.

Hospice care is a special way of caring for a patient who is in the last stages of life. Hospice provides a team of professionals who aid the patient and family caregivers. This could include nurses, social workers, physicians, clergy and aides who all work together to plan and coordinate care, 24 hours a day or as needed.

To be eligible for hospice a physician must certify the patient to be terminally ill with a life expectancy of six months or less and treatment for a cure is no longer provided. The focus for the patient has changed to supportive care and quality of remaining life. Hospice is paid for by private insurance, Medicare or Medicaid Hospice Benefit or personal funds.

Here are the conditions that apply for Medicare Hospice Benefits according to Medicare.gov:

  • · You are eligible for Medicare Part A (Hospital Insurance)
  • · Your doctor and the hospice medical director certify that you’re terminally ill and have 6 months or less to live if your illness runs its normal course.
  • · You sign a statement choosing hospice care instead of other Medicare-covered benefits to treat your terminal illness.
  • · You get care from a Medicare-approved hospice program
  • · You understand that Medicare will still pay for covered benefits for any health problems that aren’t related to your terminal illness.

Special benefit periods apply to Medicare hospice care and some services do not apply. Be sure to understand the rules and requirements of Medicare payment before you commit. You can find those here.

QUESTION: Our home was built with our own hands we have nothing else to leave, as far as an inheritance, to our children and grandchildren. My husband has become terminally ill and is not expected to make it much longer. He is very concerned because he has become unable to leave the hospital. The bills are piling up, am I going to be forced out of it when he passes?

ANSWER: If your husband is on Medicare and/or Medicaid, then, most likely, you are protected after your husband passes, however, after you pass everything changes. After both have passed your children should expect to see some aggression by the state in trying to recover the hospital's bills that were paid by Medicaid or Medicare. The home is an exempt asset according to Medicaid. It continues to be exempt as long as the community spouse lives there. However, after both the ill spouse and the healthy spouse pass away, the property may no longer be protected and the state has the right to take back whatever it paid for the care of a Medicaid applicant.

According to the Omnibus Budget Reconciliation Act of 1993 (OBRA-93), the state has the right to take back whatever it paid for the care of a Medicaid applicant. And because you have to be to qualify for Medicaid, usually the only property of substantial value that a person on Medicaid is likely to own when they die is their own home. When OBRA-93 was passed, each state established an Estate Recovery Unit (ERU) to go out and find what assets they can take back from those that received Medicaid benefits!

Because the home is the largest asset a couple can keep (while still qualifying for Medicaid), in most states, it is also the main target of estate recovery. After both the community spouse and the ill spouse die, the estate recovery unit has the authority to take just about any property that the Medicaid recipient had their name on. In most cases, that means going back to the house.

HOWEVER, According to federal law, a married Medicaid applicant is allowed to transfer the home to his or her spouse - without any penalty. Once the transfer is made (meaning the ill spouse no longer has any interest in the house), the community spouse may be able to make some changes to that asset. In some states, the community spouse can even give the house away.

If your husband is not on Medicaid, then medical creditors will most likely seek collection of unpaid bills. Under Louisiana's Homestead exemption laws, the first $35,000.00 of your home is exempt from seizure by creditors. Pending on your financial circumstances, creditor negotiations and or bankruptcy may be viable solutions.

QUESTION: My husband of 50 years recently passed away and while we never needed for anything, we also did not make very much money throughout our lives. I have a lot of things to pay for since my husband's death and I really do not want to take out all my hard-earned equity in our home to only pay it back with interest. Social security for both my husband and myself was barely enough to make ends meet. Do I have any other options that could help provide a supplemental income to my social security? if so, how would I know if I would qualify for it?

ANSWER: Yes, you do have another option, it is called a reverse mortgage. Conventional loans, like the home-equity, do not truly free up the equity to create a legitimate income because the money has to be paid back to the lender, with interest BUT WITH A reverse mortgage is a better way to tap into home equity without creating monthly payments and without requiring the loan to be paid back while the borrower lives in the home. Instead of making payments, the cash flow is reversed and the senior receives payments from the lender. A reverse mortgage is a loan against the equity in the home which provides supplemental income advances and requires no mandatory monthly re-payments during the life of the loan. Please see the answer on the website for requirements to qualify.

The proceeds from a reverse mortgage are generally tax-free and available as a line of credit, lump sum, or fixed monthly payments. The lender will recover the loan amount, plus interest once the owner(s) choose to sell their home or pass away. The remaining equity balance is passed onto heirs. Those who utilize a reverse mortgage must continue to pay their homeowner insurance and property taxes during the loan period. It is also mandatory to keep up with home's needed repairs and maintenance. The owners will retain title until they decide to sell as long as these requirements are met. WHO QUALIFIES? To qualify for a reverse mortgage, one of the homeowners must be at least 62 years of age, have significant equity in the home, and live in, as a primary residence, a multi-family home, a condominium, or a Planned Unit Development (PUD). Permanent mobile or manufactured homes are sometimes eligible. There are no income or credit score requirements to qualify for the loan because there are no monthly repayments to be made. The amount of reverse mortgage benefit for which an individual may qualify will depend on:

  • The age of the youngest person on the title
  • The market value of the home and the equity in the home
  • Current interest rates
  • In some cases, where you live

Disclaimer: The information furnished in this answer is general and may not apply to some situations. All legal situations are unique. No one should rely to their detriment on these answers. Anyone with a potential legal problem should seek the advice of a licensed attorney before taking any action or inaction. The answers provided are not intended to be specific legal advice and no attorney-client relationship is created between the SWLA Law Center and the viewers of KPLC-TV.

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