Question: After my father died, my mother lived alone for several years before falling, breaking a hip, having surgery, having a stroke, and being put in a nursing facility for rehabilitation.

Even though she needed help with everything, she wanted only to come back home to live. Because she had no one else to depend on, my wife and I moved into her house to help take care of her, and eventually we sold our home. My wife quit her job since Mom needed 24-hour care and we could not afford to hire anyone.

Because Mom’s income from Social Security was not enough to take care of all of her needs, we have been using our savings to help her. That was nearly four years ago, and Mom was doing fine until she had another stroke. After the hospital stay, she was again placed in a nursing home and will not come home again.

After she was transferred to the nursing home, she transferred her home to me to make sure my wife and I had a place to live. Because she had no other assets, I applied for Medicaid, but the application was turned down. The government found her qualified, but, under what they refer to as the “new rules”, has penalized her for 33 months because she transferred the house to me.

I am now told that I will have to go through the appeals process. We don't have the money to hire a lawyer, and find ourselves in the position of either mortgaging the house to pay for her care for 33 months, or selling it. Where did we go wrong?

Answer: We don’t believe you went wrong. Based on what you tell us, we believe that your state Medicaid folks may be confused.

The “new rules” they refer to is the Deficit Reduction Act of 2005; however, we believe your state Medicaid officials have either misread or don’t understand the effects of the new law.

Clearly, had the home remained titled in your mother's name, it would have remained an exempt asset and your mother would have qualified for Medicaid immediately -- subject, of course, to what is called estate recovery -- that is, the right of your state of residence to go against the property at your mother's death in order to collect the amount of Medicaid benefits paid to her.

However, federal law and state regulations allow an exemption from this transfer penalty when a Medicaid applicant transfers a residence to a child who (a) lived with the applicant in the applicant’s house, and (b) furnished care that was essential to help the applicant avoid institutionalization for at least two years.

While we don’t know all of the facts of your situation, it appears to us that although you may have lived in your mother’s home for more than the requisite period of time, you may not have proved to the Medicaid folks that the care you provided was instrumental in helping your mother remain at home and avoid going to a nursing facility.

With your mother needing 24/7 care, we don’t know what more you would have had to show; however, in these very complex situations, it is essential that no transfers be made without the assistance of an experienced elder law attorney. We don’t think you can afford not to hire a lawyer to help you through the appeals process.

Taking the NextStep: According to the Medicaid transfer rules (including the “new ones” that are much more restrictive from a planning perspective), a number of resources and transfers are free from consideration or penalty. For example, the transfer of a primary residence is exempt if it is transferred to 1) a spouse; 2) a minor (under age 21) or a blind or disabled child of the person; 3) a brother or sister who has an equity interest in the home and who lived in the home for one year before the Medicaid applicant was institutionalized; 4) a son or daughter who resided in the home two years and provided care so as to keep the person from becoming institutionalized.