Q. My mother, who receives Social Security, SSI and Medi-Cal, is thinking of selling her home and either buying a smaller condo, or possibly moving into a spare room in our home. When she sells her home, will she lose her any of her benefits?

A.  She won’t lose her Social Security, because eligibility does not depend upon her income or other resources, but her Supplemental Security Income (“SSI”) and Medi-Cal are at risk unless she plans ahead.

As you probably know, eligibility for both SSI and Medi-Cal depends upon her having very modest resources. For a single individual, one cannot have more than $2,000 in savings or other nonexempt resources in order to maintain eligibility.  The problem: upon sale of her home, she will receive sales proceeds which will inflate her savings to an amount far in excess of that $2,000 resource ceiling. She would then be “over resourced” and would be legally required to immediately notify both the SSI and Medi-Cal programs. Benefits would normally terminate by the following month.   However, if she plans ahead, there may be steps she can take to avoid losing her benefits:

Repurchase “Grace Periods”:  If she plans to repurchase another home, say a smaller condo, she could take advantage of grace periods under each program to temporarily exempt the home sale proceeds, pending repurchase of a replacement home.  During those grace periods, she would maintain eligibility.  There is a three-month grace period to do so under the SSI program and a six-month grace period under the Medi-Cal program. The key is to proactively advise her eligibility workers of her plans, keep the home sale proceeds segregated until the repurchase, and fully complete the repurchase within the grace periods. Unfortunately, the grace period under the SSI program is shorter than it is under the Medi-Cal program, so she would be best advised to complete her repurchase within the shorter grace period.

If she does not plan to repurchase a replacement home, or if she anticipates having excess sales proceeds after she does so, then the planning becomes a bit more complicated.  Yet doing so is still essential to maintaining benefit eligibility, at least under the Medi-Cal program.  Here are some planning options that would protect her Medi-Cal eligibility, even though there is some question as to whether they would also protect her SSI.

Irrevocable “House” Trust:  Before selling her home, she could create an irrevocable house trust, designate you as trustee, and sell it inside that trust. The sales proceeds would then be paid to you, as trustee, rather than to your mother. If handled properly, the sales proceeds would then not increase her countable resources under the Medi-Cal program. After sale, the trustee could use the proceeds to assist mother with her ongoing expenses.

Join Pooled SNT:  Another option would be for mom to join an existing Pooled Special Needs Trust (“P-SNT”) and, upon sale, immediately transfer the proceeds (or the excess proceeds) to the P-SNT. The P-SNT is a trust managed by a nonprofit organization for the benefit of its members on public benefits.  Its professional trustee would oversee management of mother’s funds and would use funds in her account to pay her expenses, albeit in a manner which would not undermine her continuing eligibility for Medi-Cal.

The key for your mother’s situation is to plan ahead.  If she does so, then the prospects of her retaining at least her Medi-Cal are excellent.

References:  Three months grace to sell and repurchase another home under the SSI Program:  20 CFR 416.1212(e), and the six month grace period to do so under the Medi-Cal Prorgram is found at 22 CCR 50426.