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Saugus Advertiser January 22, 2004

 Clarification of the “Caregiver Child Exception”

           I’ve been very busy lately. I’d like to announce that I’ve launched our new web site, www.Elderlawcenter.org.  On this web site I’ve included all of the articles that I’ve written. If you’ve missed one, you can find them all there in the “Library” section.

           I’ve also been calling our State Representatives, Mark Falzone and Kathi Ann Reinstein, concerning the upcoming override of Governor Romney’s veto of the expanded estate recovery. This is the law that allows the state to recover nursing home expenses against many assets that were protected in the past. The law is applied retroactively and spares no one. In a speech last week, Senator Creedon described this law as: You work your whole life and pay income tax, excise tax, sales tax, meals tax and so on, then upon your death the State goes to your funeral and opens your casket and takes whatever is left in your wallet!  Representatives Falzone and Reinstein are fighting this. Tell them that you appreciate what they are doing, when you see them. The override procedure starts in the House of Representatives and, if there is sufficient support, it then goes to the Senate. In addition to making these phone calls, I have been working to help draft compromise legislation in the event that a total repeal is not possible. More about that later.

Now, to this week’s article. This will be of interest to anyone who owns a multi-family home or has an in-law apartment in their home with a child living in that unit. So, even if your kid is not paying the rent, don’t kick him out until you read the following:

           The general rule is that if you own a home, and you need nursing home care, the home is a countable asset and will be liened. Upon your death the property can not be transferred without taking care of the lien. Of course, with any rule there are always exceptions. This week we will take a closer look at the “care-giver child exception” and a recent case decided on December 5, 2003 at an administrative hearing in Springfield, Massachusetts.

           This case involved “Mom”, who owned a two-family home and had transferred her home to “Daughter” in 1991, reserving a life estate. A life estate is a transfer of real estate, usually to a child, with Mom retaining the right to live in the property for the rest of her life. The life estate was a great deal because it guaranteed Mom the right to live in the house for the rest of her life. No matter what happened to Daughter, nothing could affect the right of Mom to live in the house. Mom was also entitled to the rental income, and upon Mom’s death the property automatically went to Daughter. It avoided probate and Daughter got a step up in basis, meaning that Daughter could sell it tax-free. And finally, the icing on the cake was that as long as Daughter did not sell the house while Mom was alive, the Commonwealth could not exercise any lien against the property due to nursing home expenses. Upon Mom’s death the lien was automatically extinguished.

           One little problem came up though. Your Governor decided to make up a new rule called the expanded estate recovery and apply it retroactively. Now, Mom and Daughter got a letter that said that a lien was going to be placed on the property and that upon Mom’s death the lien would have to be paid or it would be subject to interest at a rate about ten times what you could get at your local bank.  This was a notice of intent to lien and not the lien itself, just a notice. Mom and Daughter decided to transfer Mom’s life estate to Daughter under the caregiver child exception.

           The regulations (Code of Mass Regulations (CMR) 520(G)(8)(iv)) say that the home(emphasis added) of someone who requires long term care becomes a non-countable asset if a child has lived in the parent’s home for over two years and, during that time, provided care that enabled the parent to stay home rather than be in a nursing home. In our case above, Daughter had done everything necessary under the regulations to qualify as a caregiver child.  The DMA caseworker agreed except for the fact that Daughter didn’t live in Mom’s home; Daughter lived in the apartment upstairs. So, it appears that Daughter didn’t fit into the exception.

 We need to find an exception to the exception and that is found in 130 CMR 515.012. The first saving grace is that the regulation says that if Daughter lives in Mom’s property (emphasis added) DMA may not collect on their lien. It also says that it may only lien property that Mom has a legal interest in. The hearings officer decided that since the terms property and home were not consistently used that it was fair to use the broader term. Since Mom had transferred her home to Daughter after entering the nursing home and prior to an actual lien being placed, the Daughter qualifies as a caregiver child and the Commonwealth was not allowed to place a lien on the property in which Mom no longer had a legal interest. We hope that this case resolves the issue that a caregiver child may live in a separate apartment in the same building.

      This article gives general information and not specific advice on individual matters. Persons wanting individualized advice on matters discussed should contact an advisor experienced in those matters. To the extent this article provides information on legal matters, it is based on law in effect in Massachusetts on the date of posting (laws in effect in other states are often quite different).

 Ronald H. Surabian is a CPA and attorney who works at the Elder Law Center in Saugus, Massachusetts. He also holds a masters in accounting and a masters in tax law. He currently serves on the board of directors of the Massachusetts Chapter of the National Academy of Elder Law Attorneys.





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