We are in New York. We think she may have to go into long term care in the next couple of months. I know there will be a withdrawal fee for cashing out the annuity out which is fine. From what I've researched most debts like medical debt or mortgage can be paid using money from her resources. If she leaves the annuity in place it will count against her for Medicaid eligibility as puts her nearly $30k over NY's $31k allowable resource amount would be taken by Medicaid as I understand it. We would much rather see her pay off the mortgage with it then lose it to Medicaid altogether. If we do it is there still any risk Medicaid could penalize us for doing it even though Medicaid guidelines clearly say debt can be paid with resources?
This is done by States as a way for them to enable applicants to have higher income for their Share of Cost requirements paid to the NH (makes NH happier as less risk for them). Cashing out an annuity only is a positive for the insurance company and the insurance agent, everyone else is loosing out on a cash out.
OP I have a ? for you…… so you mention “pay off the mortgage…. loose it to Medicaid”. So is the plan to be that your mom continues to keep her home even though she is going to need to go into a NH for care as being in her home cannot reasonably work for her level of care needed? And she will be filing for LTC Medicaid to pay for that NH stay? Right?
If this is the plan, realize that she is required to do a Share of Cost paid to the NH of her income each and every month. And all she will have for flexible $ is NYS Personal Needs Allowance which will be maybe $50 a mo. So although Medicaid totally allows them to keep their home, they will have zero $ to pay any of its costs from day 1 of LTC Medicaid filing to maybe a year or 2 after death to deal with Estate Recovery &/or probate. Could be more than 2 years. Ultimately this becomes the POAs problem to deal with and bankroll. Can you afford to do this?
A fully owned house can be somewhat mothballed and left empty so costs are minimal, no repairs done / minimal maintenance and the elder retains their homestead exemption so they can have lower taxes and still be able to get traditional homeowners insurance. But a home with a mortgage has more costs and required to be fully insured however needed for your area. If there are 3 kids and those other 2 DNGAF to help you as the POA pay the costs of moms house, or help in upkeep, they don’t have to; yet they each get their 1/3 as that’s how moms will reads.
The Share of Cost mo. income requirement often comes as a total surprise to families. No way around the SOC requirements unless there is a community spouse or a legal dependent. Some States will allow a waiver of the mortgage amount for a limited time if the home is up for sale with a Realtor and MLS listing (so no FSBO nonsense) with the $ from the Act of Sale used as a spend down & maybe to repay costs paid as well.
Elder retaining ownership of their home can be done, LTC Medicaid allows for this & cannot require elder to sell their home. But imo POA needs to have an idea on how they will deal w/Estate Recovery, probate or if there is something unique abt the property for NYS real estate laws. Plus better have the time, $, sense of humor for an undetermined period of time and be ok on risk that it may not work out. It’s like having a second home but one you do not yet own. Most of us cannot afford a second home.
if the occupant was living there prior to the elder moving into a NH and was caregiver, they are usually ok on being there rent free as they will be all about filing the caregiver exemption to Estate Recovery. If the occupant are themselves disabled or low income, they usually can stay living there rent free because if they had to find a place it would mean State / Feds be paying for housing. But able bodied family living in the home = rent paid.
Elder keeping their home while on LTC Medicaid can be done. But the POA has to have imho a plan on how to deal with Estate Recovery and the $ & resources to cover property costs for an undetermined amount of time. If this is your intent, then mom using her annuity $ to pay off mortgage is to me a good move. Mortgages require proper insurance coverage and some degree of maintenance & visual upkeep or the mortgage co can call in the loan and do a foreclosure if you can’t pay off the call in. No mortgage, then other than paying prop taxes and occasional yard work, you can leave the property in limbo.
She needs to spend down ALL assets. To go on Medicaid to go in a SNF. She cannot pay the mortgage, taxes and utilities so the house is vacant and subject to forclosure. Nor can she rent because it becomes a reportable asset. There is no way the home will be inherited once Medicaid is filed unless there is a buyer who is willing to pay market value. All of what she owns goes into her care before us taxpayers foot the bill. See a lawyer for options. She might get by with cashing the annuity, but SNF care is tax deductible as well while out of pocket.
The home should go on the market as soon as possible. I hear in NYC that it takes several months to even close once a buyer is found.
There are so many aspects to her situation. According to the assets you said she is viewed as single without a spouse that will live in house. Therefore her house counts in the asset category and will need to be sold. Unless you plan as income rental but that will need to go directly to facility. Or, if there is a life use agreement and was deeded. However, that is another question that requires expert advice that very few of us are expert on with so little information.
The list continues so the expense of an attorney is well worth it to assist you. The cost will count as an allowed spend down expense too.
Then she should definitely first consult with either a certified elder law attorney who is experienced with Medicaid (not all are) or a Medicaid Planner for NY state.
Otherwise, just pick out a great facility that accepts Medicaid and private pay until her funds are low enough to qualify for Medicaid. This way she will avoid waiting lists and being relegated to Medicaid-only facilities. You really don't want her to be on Medicaid before trying to get in someplace good...
You need to take all financial assets and 5 year lookback history, and current debts to an attorney, CELA Elder Law specialist, and discuss in an hour of time what options are best at this time.
The problem here is that a mistake would be CATASTROPHIC and something you cannot afford to make. And asking "the man on the street" these crucial questions can result in catastrophe that cannot be rolled back.