One asset planning question that many seniors have when considering a move into a retirement home or assisted living is whether or not they must sell any properties they own, including their primary residences, vacation homes, or investment properties.

The Simplest Answer

The simple answer is that there is no simple answer. It depends on how you are funding your retirement care, whether or not it is a primary residence, and whether or not anyone is still living in the home.

If your assisted care is being funded through your 401(k), IRA, or another private retirement asset, then you don't have to sell any of your property, unless you need to liquidate for unforeseen expenses.

If changes in Medicare or Medicaid have allowed you to subsidize any part of your care, the Centers for Medicare and Medicaid Services (CMS) will attempt to recoup expenses paid for care on your behalf from your estate. Before Medicare or Medicaid payments may be made, the recipient must liquidate and spend down disposable assets.

What are "disposable" assets?

CMS in most states considers anything other than the recipient's primary residence and certain cash limits to be subject to spend down, This includes IRAs, 401(k)s, pension funds, bonds, vehicles, investment properties and second homes.

In the state of Ohio, a recipient's primary home is not typically counted among disposable assets. If a recipient is placed into nursing care or is away from the residence for two or more years without the expectation of returning, however, the state may file a lien and begin liquidation procedures for the home.

Can I transfer my assets to my spouse or to relatives?

Not generally. It can be tricky, if not outright illegal.

You cannot usually gift or transfer title to adult and able-bodied children, other relatives, friends, or to most trust funds, without incurring an ineligibility penalty (meaning you are not eligible to receive Medicare or Medicaid benefits for a certain amount of time— this is also known as being placed on "sanction").

In the case of a married couple in which one partner is entering an assisted living arrangement and the other is still living independently, the house is protected if it is the independent spouse's primary residence. Any jointly-held assets, however, are subject to spend-down to the limit the state defines on the Medicaid recipient's portion of ownership.

Say, for example, a couple owns two homes: one is the couple's primary residence in Cincinnati and the other is a vacation condo on the Gulf worth $300,000. The home in Cincinnati would be protected as long as the independent spouse is living there.

The couple would, however, have to sell the condo as, generally speaking, $150,000 of the proceeds would be recoverable by the state— the half the state would hold the recipient responsible for ownership of. The laws might vary slightly from state to state, so it is best to seek council from a lawyer who specializes in your state's Medicaid eligibility regulations.

What if a dependent other than a spouse is still living in my home when I enter assisted care?

A Medicare or Medicaid recipient may, in most states, freely transfer title for a primary residence (not for disposable assets), without incurring an ineligibility penalty, to any of the following:

• A blind or permanently disabled (meaning the individual is receiving SSDI payments) child who is under 21 years old
• A child of the recipient, who has lived in the house for at least two years prior the recipient's entry into a retirement home and who, during that 2-year period, provided care that allowed the recipient to avoid a nursing home stay
• A brother or sister who has (a) lived in the home for the entire year immediately preceding the Medicaid recipient's entry into assisted living and (b) who holds an equity stake in the property
• Into a trust that has been established for the sole benefit of a disabled individual under the age of 65 (even if the trust is for the benefit of the Medicaid applicant, under certain circumstances)

How do I figure out the best retirement plan to fit my needs?

The best course of action is to start planning early with help from a legal expert and/or certified financial planner who specializes in eldercare law and knows the ins and outs of your state's Medicare and Medicaid regulations. Then be flexible enough in your planning to be able to adjust as circumstances require.

If you are already thinking about your retirement care options for the near (or distant) future, now is the time to start making decisions and making your loved ones aware of your wishes.

Speak with a lawyer and draw up a living will, designate your medical powers of attorney and set an advance directive. With the proper planning, you can make your transition to assisted care as seamless as possible