Protecting Your Home from Long-Term Care Costs in Kentucky

Long-term care costs can deplete a family’s assets rather quickly, especially nursing home care. Many Kentuckians worry about losing their family home to pay for Medicaid-covered care, particularly because it is the largest asset at risk. 

In this article, we will explore protecting your home from long-term care costs in Kentucky as you plan for Medicaid eligibility and long-term care needs. 

How Long-Term Care Costs Threaten Your Home

Depending on location and the level of care, nursing homes in Kentucky can be quite expensive – around $7,000-$10,000+ per month. Without proper planning in advance, you may find yourself in a situation where you’re forced to spend down assets, including home equity, before you qualify for Medicaid. 

When a Medicaid recipient passes, the state could seek reimbursement through the Kentucky Medicaid Estate Recovery Program (MERP). The key risk here is that the state can file a claim against the probate estate. In doing so, it may potentially force the sale of the home. 

Understanding Medicaid Eligibility Rules in Kentucky

Typically, Medicaid will cover the long-term care needs only for those who meet strict asset and income limits. Exempt, or “non-accountable” assets usually include:

• Primary residence (with equity limits and intent-to-return rules). 
• One vehicle. 
• Personal belongings. 
• Certain pre-paid burial plans. 

Despite the fact that the home is typically non-countable, it still will remain subject to estate recovery after death. The exception to that is if it’s legally protected. 

Under Kentucky law, there is a 5-year look-back period on asset transfers, penalizing transfers made for less than fair market value. 

Strategies to Protect Your Home from Long-Term Care Costs 

1. Medicaid-Compliant Asset Protection Trust (MAPT)

• In the case of an irrevocable trust, the home could be transferred out of the owner’s name. 
• After the 5-year look-back period passes, the home benefits from protection from Medicaid spend-down and estate recovery. 
• The homeowner can remain in the home and will still be in control over decisions like repairs and taxes. 

2. Life Estate Deeds/Lady Bird Deeds (when applicable)

• In Kentucky, traditional life estates are allowed, but not Enhanced (“Lady Bird”) Deeds. 
• Under a life estate deed, you will retain the right to live in your home for life, and simultaneously you can transfer remainder ownership to heirs. 
• This method avoids probate and, effectively, estate recovery, however it could still be subject to the 5-year look-back. 

3. Spousal Protections

• Under the federal spousal impoverishment rules, Kentucky allows the “community spouse” to retain the home, a Community Spouse Resource Allowance (CSRA), as well as a Minimum Monthly Maintenance Needs Allowance (MMMNA). 

4. Long-Term Care Insurance

• Supplementing Medicaid planning, it can reduce the risk of a lien or estate recovery.

Beware of the Five-Year Look-Back Period

Medicaid will examine all transfers that took place within 60 months prior to application. Consequently, any transfers of the home for less than what’s considered fair market value can result in a penalty period, which will then delay Medicaid eligibility. 

What this means is that early planning is crucial, ideally even before care is needed. Whilst emergency planning is still possible, options could be more limited and could require more advanced legal strategies. 

How Estate Recovery Works in Kentucky

After the recipient of Medicaid passes, Kentucky could seek reimbursement from the probate estate for any long-term care costs that have been paid. 

In the event the home passes through probate, the state can place a claim which could order the sale of the home. 

This is why proper planning is essential – whether it be trusts, life estates, or probate avoidance, it can keep the home out of probate, preventing recovery and protecting the heirs. 

Why You Need Legal Help

Your home is valuable – it is one of your most valuable assets. The experienced attorneys at Hoffman Walker & Knauf are capable of creating long-term care plans which will protect your home. 

Contact us today for a consultation, and let’s work together in preserving your family’s financial future.