A recent Supreme Court of Ohio decision [Estate of Atkinson v Ohio Dept of Job & Family Service, 9/8/15] denied the residence exemption for a married couple and will be forcing some community spouses to sell their home in order to spend down for Medicaid.
A community spouse is entitled to a resource allowance equal to 50% of the combined countable assets. The residence of the community spouse is not included in this calculation since it is exempt. However, beginning in 2006 the Ohio Department of Medicaid (ODM) started denying this residence exemption if the residence was owned by a revocable trust. This is clearly an incorrect interpretation of the trust rule. The residence should retain its exemption even though it is held in a revocable trust. The agency's interpretation of the revocable trust rule reflects a misunderstanding of what the word “revocable” means and the nature of a revocable trust. An asset held in a revocable trust is clearly available for use by an applicant and is a countable resource. However, this should not change the nature of the asset if it is provided for in another Medicaid regulation to be a non-countable resource. The distinction is whether the resource is “available” to the applicant or whether it is “countable.” It can be available yet non-countable.
Marcella and Raymond Atkinson transferred their residence into a revocable trust in 2000. Eleven years later on April 25, 2011, Marcella entered a nursing home. The total value of their countable resources under Medicaid law on said date was $98,320. Although the residence is normally a non-countable resource when the community spouse still resides there, it was included as a countable resource ($53,750) since it was held in a revocable trust. The community spouse resource allowance (CSRA) for Raymond is one half of the total or $49,160. Marcella filed an application for Medicaid on June 16, 2011. Upon learning that there would be a problem with the residence being in trust, title to the residence was transferred from trust to Marcella on August 8 . On August 9, Marcella transferred title to Raymond. ODM determined that Marcella had spent down to less than the CSRA to become eligible as of August. However, they determined that the August 9 transfer of the residence from Marcella to Raymond was an improper transfer resulting in an ineligibility period.
On appeal to the Supreme Court of Ohio, the court upheld ODM's decision that the home was a countable resource and that there would be a transfer penalty. The inequity of the Atkinson ruling and ODM regulation can be illustrated by the following examples.
EXAMPLE 1:
Bill & Mary own the following resources upon the first date of institutionalization of Bill: Residence held in Bill & Mary's individual names jointly (JTWRS) worth $100,000; one car of $4000 and bank accounts of $10,000. The total countable resources are $10,000 which is less than the minimum of $23,844. Thus, Mary is entitled to keep the $10,000 with no spend down. The residence and car are non-countable resources.
EXAMPLE 2:
Bill & Mary own the following resources upon the first date of institutionalization of Bill: Residence held in Bill & Mary's Revocable Trust worth $100,000; one car of $4000 and bank accounts of $10,000. Mary would have to “spend down” $55,000 (100,000 + 10,000 = 110,000 / 2 = 55,000; car is non-countable). Mary would spend down by selling their residence and spending $55,000 from the proceeds of sale.
The above example demonstrates what will happen to citizens of the State of Ohio as a result of the Atkinson decision. A common situation will be an 85 year old woman who will have to sell the residence that she and her husband have been living in for 50 years and paid off the mortgage many years ago. She would not be able to buy a comparable residence with one half of the proceeds and most likely would need to rent an apartment. This result is not what was intended by the Medicaid exemption for the residence.
The Ohio State Bar Association has been aware of this problem and introduce legislation to correct ODM's erroneous rule. The statute (O.R.C. §5163.21(E)] was passed by the Ohio legislature but was vetoed by Governor John Kasich on June 30, 2015. The governor explained his reasons for the veto as follows:
"This item would allow an individual to hold certain resources in a revocable trust, without penalty, that might otherwise be used to pay for his or her long-term care costs before entering the Medicaid program. Additionally, it allows an individual to receive an income stream from the home without making a corresponding contribution toward his or her long-term care costs. This ability to shelter income is currently the subject of litigation before the Ohio Supreme Court. Vetoing this item is necessary to maintain the fiscal and programmatic integrity and stability the administration has established for the Ohio Medicaid program. Therefore this veto is in the public interest."
This explanation reveals two very clear misunderstandings of the basic principles of the Ohio Medicaid program. The home has traditionally been exempt for a community spouse from spend down and certainly would be if the Deed was in the individual name of either or both spouses. Therefore, the home would not "otherwise be used to pay for .. long-term care costs." Secondly, a person's home does not have an income stream. The home is mostly an outgoing stream of expenses as we all know. The Governor did not explain how it is in the public interest to force an elder spouse to sell his/her home they have lived in for many years.
Because of the above state of the law in Ohio, it is very important for anyone who is or may soon be entering a nursing home and who has a revocable trust, to make sure that the title to the residence in the Deed is not in the name of the trust. In order to retain the residence exemption for the community spouse, title to the residence must be in the individual names of one or both spouses. You should consult an elder law attorney competent in Ohio Medicaid law to change your Deed.