The Caretaker Child Exception (PART I: How Far Does it Extend?)

By: Robert J. Kurre, J.D.

Your newest client has just entered your office and presented you with the following facts: your client is the 42 year old adopted son of an 85 year old widow who has just entered a nursing home for long term care. The widow owns a building in her name alone which was purchased in December 1999 for cash. The building is worth approximately $500,000 and consists of a store and two apartments. One apartment is occupied by your client and his wife. The other apartment was occupied only by the widow up until the time of her institutionalization. The widow’s only other asset is a bank account with a current balance of $3,000. Her monthly income consists of her social security check of $1,500 and rent of $750 from your client and $1,200 from the store. Your client had lived under the same roof as his mother for his entire life (until she entered the nursing home) with the exception of a six month period starting in June 2000 in which he lived overseas while working on a research project related to his employment. The client advises that this was a short-term job assignment which he undertook with the intention of returning home to live in his apartment in his mother’s building once the assignment was over. He did, in fact, return to live in the apartment in January 2001. Your client has provided some minor assistance to his mother with her activities of daily living over the last five years. During this time period, her health has slowly but steadily deteriorated. Your client and his mother have not always enjoyed a stable relationship. In fact, in 1997 his mother called the police and filed a formal complaint against your client claiming that he had shoved her during an argument. Your client’s paramount concern is whether his mother’s primary asset – the building – will have to be sold to cover the cost of her care at the nursing home thus leaving him and his wife without a place to live.

Your initial reaction is that the widow may be able to transfer the home to your client as an exempt transfer thus not incurring any period of ineligibility for Medicaid nursing home benefits. However, given the facts you are uncertain of the applicability of the exception that may apply to this situation – the exception commonly known as the “caretaker child exception”.

This article will examine the elements of the caretaker child exception in the context of the above facts. It will offer an analysis as to how far this exception to the transfer penalty rules, in connection with Medicaid nursing home benefits, extends. Part II of this article will appear in the next issue of the NYSBA Elder Law Attorney and examine the issues of liens, estate recovery, tax considerations, and the different methods for transferring ownership of a homestead to a caretaker child.

The caretaker child exception provides that a Medicaid applicant may transfer, without penalty, his or her “homestead” to the applicant’s “child” who “resid[ed]” in the homestead for at least two years “immediately” before the date on which the applicant was institutionalized and who “provided care” to the applicant which permitted the applicant to reside at home rather than in an institution or facility.1

The language of Social Services Law § 366 (5) (d) (3) (i) (D) and the New York State Department of Health Regulation (18 NYCRR § 360-4.4 (c) (2) (iii) (b) (4)) pertaining to the caretaker child exception raises the following issues:

  • What is considered a homestead?
  • Who may qualify as a child?
  • What level of care is necessary to satisfy the requirement of providing care?
  • What if the applicant and the child have lived together the last two years but they changed their residence within this time period?
  • What if the applicant and child have not physically lived together during the entire two year time period?

The Homestead

The property you are trying to preserve in our fact pattern is a hybrid property – it is both residential and commercial in nature. Specifically, it contains two apartments and a store. Can such a property qualify as a “homestead” under the caretaker child exception? In addition, does the fact that your client and his mother live in separate apartments in the building prevent him from qualifying as a caretaker child?

A homestead is defined in the New York State Department of Health regulations as:

the primary residence occupied by a medical assistance applicant/recipient and/or members of his/her family. Family members may include the applicant’s/recipient’s spouse, minor children, certified blind or certified disabled children, and other dependent relatives. The homestead includes the home, land and integral parts such as garages and outbuildings. The homestead may be a condominium, cooperative apartment or mobile home. Vacation homes, summer homes or cabins are not considered to be homesteads.2

The regulations do not differentiate between single family and multi-family dwellings in defining what constitutes a “homestead”. Nor do the regulations specifically address hybrid properties – such as the one in the present fact pattern – which consist of both residential and commercial units. However, the Medicaid Reference Guide does set forth that a homestead may be income producing.3 Furthermore, 18 NYCRR §360-1.4(f) provides that the “homestead” includes the “home, land and integral parts such as garages and outbuildings”, suggesting that anything connected to the primary residence is part of the “homestead”. Accordingly, a “homestead” should include multi-family dwellings provided the applicant uses one of the units as his or her primary residence. Similarly, hybrid properties should be considered homesteads provided any businesses on the property are part of the same building as the applicant’s primary residence.

In our fact pattern, the building should thus qualify as a homestead, as this term is used in connection with the caretaker child exception, since your client’s apartment and the store are each part of the same building that includes the applicant’s apartment. Similarly, the fact that your client and his mother live in separate apartments is irrelevant as the apartments are within the same building.4

Who is a Child?

Your client has advised that he is the adopted son of the applicant. Does an adopted child qualify as a “child” under the caretaker child exception?

Nothing contained in the Social Services Law or New York State Department of Health Regulations or Administrative Directives provides an answer this question, however, inone fair hearing decision, a “child” was strictly interpreted to mean only a biological or adopted child of the applicant.5 The Administrative Law Judge (“ALJ”) determined that a grandchild, niece, nephew, or foster child would not be considered a child as used in the caretaker child exception. Thus, such categories of relatives would not qualify as transferees of a homestead under the caretaker child exception. The ALJ upheld the Agency’s determination that the applicant was ineligible for Medicaid nursing home benefits where the homestead was transferred to a foster child who had lived with the applicant in the homestead for almost sixty years. The ALJ stated: “[w]hile extremely sympathetic to the relationship between the [applicant] and her foster child, the Regulations do not allow the transfer of the household [to a foster child]”.6 The ALJ’s narrow view of who may qualify as a child casts doubt on whether the definition of a “child” can be expanded beyond its common meaning of a biological or adopted child. In our fact pattern, your client should qualify as a “child” under the caretaker child exception provided he can document that he was legally adopted.

What Constitutes Providing Care?

Given the facts presented by your client, has he provided enough assistance to his mother to satisfy the element of providing care under the caretaker child exception? The facts presented indicate that your client has provided some assistance to his mother with her activities of daily living over the last five years. The facts, however, also indicate that he and his mother have had an uneven relationship with at least one physical altercation having occurred between the two of them within the last four years.

The element of providing care ordinarily can be satisfied without difficulty. The pertinent regulation provides that the care provided by the caretaker child must have “permitted [the applicant] to reside at home rather than in an institution or facility”7 and references 18 NYCRR § 311.4(a)(1) for the definition of providing care. 18 NYCRR § 311.4(a)(1) states that the phrase “provid[ing] care” means making arrangements or actively participating in making arrangements for care directly or indirectly, in whole or in part. Similarly, 92 ADM-53 indicates that “provid[ing] care” means care which permitted the applicant to stay at home rather than in an institution and that this can be proven by submitting evidence that the child made arrangements or actively participated in arranging for care, either directly or indirectly, full time or part time. In practice, however, once it is demonstrated that the child is the biological or adopted child of the applicant, the only additional proof that normally is required by the local departments of social services is evidence that the caretaker child lived in the homestead with the applicant for at least two years immediately prior to the date the applicant became institutionalized. Generally, Medicaid presumes that the child “provided care” unless there is evidence to the contrary.8 Examples of proof that should be sufficient to demonstrate that a caretaker child resided in the homestead for at least two years may include a driver’s license, bills, and tax returns bearing the caretaker child’s name along with the homestead address.

Accordingly, the element of “provid[ing] care” would ordinarily be easily satisfied by your client given the presumption that care is provided. However, in this case, the formal complaint filed against your client by his mother could provide a stumbling block to satisfying the element of providing care should such facts come to light.

Change of Residence Within The Two Year Period

In our fact pattern, your client and his mother had lived under the same roof their entire lives. However, the particular homestead where they lived up until the time of her institutionalization was only purchased in December 1999. Thus, two years have not elapsed since the date of purchase of the current homestead and the date the widow entered a nursing home. Is the caretaker child exception available in those situations where an applicant and her child have changed their residence within the two year period immediately preceding institutionalization?

The wording of the caretaker child regulation seems to foreclose the possibility that there is “tacking” or credit given for time periods in which the applicant and the caretaker child lived together in other homes prior to the time they lived together in the homestead which the applicant wishes to transfer to the caretaker child. The regulation makes specific reference to title to the homestead being transferred to a caretaker child who lived with the institutionalized spouse in “such homestead” for at least two years immediately prior to the date the applicant was institutionalized.9 Thus, a literal interpretation of the regulation does not seem to allow for the possibility that the applicant and child may have moved within the two year period immediately preceding institutionalization. Such a move is not uncommon as seniors sometimes purchase smaller, easier to maintain residences as their health begins to fail.

Federal law, however, seems to allow the use of the caretaker child exception even in those cases where the applicant and child have not lived together in the homestead being transferred for the requisite two year time period as long as they have lived together during the entire two year period preceding institutionalization. 42 U.S.C. § 1396p (c)(2)(A)(iv) provides, in relevant part, that the home may be transferred, without penalty, to a child of a Medicaid applicant “who was residing in such individual’s home for a period of at least two years immediately before the date the individual becomes an institutionalized individual, and who…provided care to such individual which permitted such individual to reside at home rather than in …. an institution or facility”. (Emphasis added). Thus, the federal statute seems to allow the applicant to take advantage of the caretaker child exception where he or she has lived together with the child in any abode for the requisite two year period.

Accordingly, the state regulation seems to provide a narrower standard than the federal statute since it requires the applicant and the child to have lived together in the homestead (which the applicant now seeks to transfer to the caretaker child) for the entire two year time period immediately preceding institutionalization. The federal statute merely requires that the applicant and child must have lived together in the same home(not necessarily the homestead being transferred) for the entire two year period immediately preceding institutionalization in order for an exempt transfer to take place. Thus, this aspect of the state regulation which seems in conflict with federal law may be ripe for challenge under the doctrine of federal supremacy. Accordingly, the caretaker child exception should still be available in those situations where the child and applicant have lived together in different residences as long as they have lived together for the entire two year period immediately preceding institutionalization.

Time Spent Apart During Two Year Period

Your client and his mother have not physically lived together during the entire two year period immediately preceding her institutionalization. He lived overseas while on a work assignment from June 2000 through December 2000. Did this time that your client and his mother spend living in different places prevent him from qualifying as a caretaker child?

The state regulation10 and the federal statute11 each provide that the caretaker child must have “resid[ed]” with the applicant for at least the two year period “immediately” preceding the date the individual becomes an institutionalized individual in order for the transfer to be approved as exempt. The presence of the word “immediately” preceding the phrase “before the date the individual became an institutionalized individual” seems to mandate that the applicant and child must have lived together continuously for the entire two year period preceding the applicant’s institutionalization. However, a definition of “residing” is not spelled out under the state regulation or federal statute. Thus, it is unclear whether a transfer of the homestead to a child would constitute an exempt transfer where the child has not physically lived with the institutionalized person in the homestead for the entire two year period immediately prior to institutionalization, however, the child maintained his or her legal domicile at the same residence as the applicant throughout that time period.

Your client should, in the opinion of the author, still meet the requirement of having lived in the homestead with the applicant during the requisite two year period as he indicated to you that his intent was to maintain his domicile at his mother’s residence during his absence from such residence due to his work assignment. If, however, your client had taken steps to change his domicile to the overseas location where he was working and such steps resulted in a lack of documentation evidencing his domicile at the same address as his mother, it would become very difficult to satisfy this element of the caretaker child exception.

Conclusion

The caretaker child exception is a valuable tool in the practitioner’s arsenal of planning strategies to preserve the family home. It can be readily utilized in those situations where a biological or adopted child has maintained his or her domicile in the applicant’s residence for the entire two year period immediately preceding the applicant’s institutionalization. By understanding its purview, the practitioner can best serve the client. Part II of this article (to appear in the next issue of the NYSBA Elder Law Attorney), will consider the issues of liens, estate recovery, tax considerations, and the different methods for transferring ownership of a homestead to a caretaker child.

 

1 Social Services Law § 366 (5) (d) (3) (i) (D); 18 NYCRR § 360-4.4 (c) (2) (iii) (b) (4).
2 18 NYCRR § 360-1.4 (f).
3 Medicaid Reference Guide (August 1999) at page 273.
4 If the mother did not transfer the building to your client and she executed a Statement of Intent to Return Home making the homestead an exempt asset (i.e., not counting towards her countable resource limit of $3,750 in 2001) for purposes of qualifying for Medicaid, it should be noted that the rent from the building would not be considered exempt. Accordingly, if title to the property remains in the name of the applicant, the net rent from the property (i.e., after deducting insurance, maintenance, and taxes) will be budgeted as part of the applicant’s Net Available Monthly Income with all income over $50 per month being paid to the nursing home. As set forth in Part II of this article, if the homestead is not transferred to your client, there is an additional risk of the imposition of a lien on the building.
5 In re Appeal of A.W., Fair Hearing #3171515N (November 4, 1999).
6 Id.
7 18 NYCRR § 360-4.4 (c) (2) (iii) (b) (4).
8 Medicaid Reference Guide (August 1999) at page 355.
9 18 NYCRR § 360-4.4 (c) (2) (iii) (b) (4)
10 Id.
11 42 U.S.C. § 1396p (c) (2) (A) (iv)