Qualifying a family member for Medicaid assistance with the cost of nursing home care can be complicated. When Pat Monroe’s mother went into a nursing home in Arkansas, Ms. Monroe had a clever idea: she had her mother buy an interest in her own home. Unfortunately for her it didn’t work as she intended.

Ms. Monroe’s mother, Berniece Groce, had moved into the Clay Cliff nursing home in July. Ms. Monroe held a power of attorney for her mother, and she used it to pay the nursing home expenses for nearly a year.

Ten months later Ms. Monroe took an unusual step. She bought a home for her mother—or at least an interest in a home. Using the last of her mother’s savings she paid $43, 953.13 for a "life estate" in Ms. Monroe’s own home.

The holder of a life estate is entitled to the use of the property for the rest of their lives, but their interest expires automatically on death. It is not uncommon for a property owner to transfer title to children or others, retaining a life estate. By this means the owner can dispose of the "remainder" interest during life while protecting his or her own right to use the property for life. But what Ms. Groce did (through her daughter) was different. She did not retain an interest in property she already owned, but instead purchased the life interest in property she had never owned before.

Because a Medicaid recipient is entitled to retain his or her home, Ms. Monroe reasoned that her mother’s life estate in the residence would be protected. Ms. Groce would qualify for Medicaid, Ms. Monroe could continue to live in the home (with her mother’s permission, of course), and her mother’s interest in the home would automatically disappear at her death.

Unfortunately for Ms. Monroe, the state Medicaid agency saw things differently. In its view, the purchase of the life estate was nothing more than Ms. Groce giving away over $40,000. She did not really purchase anything of value, reasoned the Medicaid agency, and she never actually resided in the home.

After Medicaid eligibility was denied Ms. Monroe appealed on her mother’s behalf. The Arkansas Court of Appeals agreed with the Medicaid agency and the trial court, and denied Ms. Groce’s Medicaid eligibility until the expiration of the disqualification period imposed by the $43,953.13 gift. Groce v. Director, Arkansas Dept. of Human Services, June 11, 2003.

Arizona Medicaid regulations require that the Medicaid applicant either actually resides in the home or "has resided" there. The result would probably be the same in Arizona.

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