My father in law just entered a long term care facility and currently has 4 or 5 months of full coverage with Medicare. After that he will have to pay out of pocket. Since his house still has a mortgage and is excluded in determining eligability for MedicAid would it be wise/legal to pay off the house with his 401k money to avoid that money going to a nursing home?
1 Answer from Attorneys
I don't think so. And I don't see how paying off the house would hinder it from going to Medicaid. The home may not be counted as as an asset right now for Medicaid eligibility. But if there is no mortgage., what then? The house is an asset. Either your father will be ineligible for Medicaid because he has too many assets or Medicaid is going to assert a lien against the home when your father dies.
It would have been far better for your father to do Medicaid planning before he entered the long term care facility. Maybe he needs to sit down with an elder care attorney (if he is mentally competent - there are even attorney's who will come to the home) and review his asset and debt situation. It might make more sense to do something else.
401(k)s to my knowledge are beneficiary-designated assets which would pass outside of probate. If that is the case, then it would definitely not be a good idea to take a non-probate asset that can go to the heirs free and clear of any liability for Medicaid and turn it into a probate asset which (a) either has drastic effects and renders your father ineligible for Medicaid or (b) will result in probate liability for your father.
Might want to see what other options there are before this is done. I would try to prohibit your father from having to take Medicaid money for as long as possible as PA has a law that provides that if your father's estate is insufficient to pay back Medicaid (which by law is mandated to seek reimbursement from your father's estate when he dies) then the spouse or children can be personally liable. This would not be a good thing.
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