A client recently had the issue of planning for Medicaid for his mother who needed Nursing Home care but had limited assets. One fly in the ointment is that the family had sold mom’s home on a land contract. The issue is how does Michigan Medicaid treat that land contract.
To qualify for Medicaid in Michigan to receive funds to help pay for nursing home care, a single individual or widow can only have $2,000 worth of countable assets.
Does a land contract count towards that asset limit or is it considered an income stream for Medicaid in Michigan?
The answer is….it depends. Just like many legal questions there are a number of factors in whether the land contract is an income stream or an asset.
A seller’s interest in a land contract is typically viewed as an asset according to the BEM (the manual case workers use to administer Medicaid in Michigan). The value of the asset is what the land contract could be sold for in the owner’s local area on short notice. The land contract is the present value unless 2 banks or real estate appraisers say it is non-assignable or that it has zero value. If that’s the case the the land contract would be valued as an income stream.
What To Do with a Land Contract and Medicaid?
So what to do? It depends on what your family’s goals. I’d recommend engaging a Certified Elder Law Attorney to advise on legal strategies to plan for Medicaid. For example, a half-loaf plan could be used to protect 50-60% of a single individuals assets from nursing home or Medicaid spend down. With a married couple, we may be able to protect 100% of the assets, so that the all of the assets are available for the health, community spouse. Give us a call at (888) 390-4360 and we can discuss all the potential options to plan for your family.