What is the legality of renting out mother-in-law's home?

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My mother in law ( MIL) has been in a board and care (B&C) for several months due to falls and she can't walk ( bad knees). I have spent several months rehabing her paid off house for rental to support MIL.
My wife's' sister ( who favors selling the house, instead of renting for support income) contacted MIL estate lawyer who said the daughters could not rent or sell the house, but had to leave it vacant. Lawyer also said my wife should not have sold the cabin owned 50/50 by wife and MIL.


MIL needs cash flow for the B&C...
Seems it is in best interest of MIL to rent house for income ( and to pay for the approximate $ 15,000.00 in rehab costs I put up..


Any ideas on these matters? The legality of renting for MIL support? MIL has a Living trust, and daughters are the assigned trustees, if needed. MIL is 'slightly' slowing down, but is aware off most stuff, but does sometimes forget recent events, though long ago stuff is very clear in her mind.
Bob

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igloo572 pretty much nailed it
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About the "vacant" / empty house approach, for some states the $ paid by family on vacant property costs (taxes, insurance, standard maintenance) while elder is alive, can be totally deducted from the medicaid tally that ends up becoming MERP after death.

Say house costs all in 7k yr, which DPOA son pays. If the houseowner on NH Medicaid lives 5 yrs, that's 35k. If property is modest with assessor value under 50k, between the 35k deduction and funeral costs and probate costs, the estate is likely to be under the 10k cost benefit analysis for MERP to be done. House distributed as per terms of will.

To me, if elder wants to keep home & family wants to honor the request, then family needs to be able to pay every penny on property from day 1 of Medicaid till an indeterminate end point after death in order to be compensated for those costs.

Based on posts on this site, family is all gung ho first few months..... then Sissy forgets to pay property taxes, nephew stops cutting grass, new vacant dwelling insurance policy not done so it's uninsured.... Yada, yada..... so it gets sold @ FMV yr & 1/2 later. All $$ from the sale becomes moms asset / income so she's off Medicaid till a total spenddown happens & then dpoa has to deal with application again. Family can't be reimbursed for costs paid as viewed as gifting.
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Hmmm.... so Bob, heard this directly from MILs atty?
OR via SIL who wants the house sold? If it's the latter, I'd be concerned that Sissys beyond over the house, it's being "rented" means tenants, etc & more work for her..., means dealing with paying you back 15k for the work you did to rehab it (bet Sissy didn't want this either); plus there's that issue of your wife selling co-owned weekend cabin. Sissys concerned (correctly) that all this will pose future problems.

It's perhaps more an issue very different approaches on affording moms future. Which path to take is something to be clearly discussed with the atty & the sisters agree to it.......

If mom currently has difficulties paying for a board & care home - which are lots LOTS cheaper than AL or NH - then mom will eventually apply for Medicaid. Medicaid has very strict eligibility & can do a 5 yr look back on all $ spent & assets sold & current income limits. Could be Sissys worry.

Mom kinda has red flags flying if Medicaid to be applied for:
- cabin - sold FMV? Open market/mls listing? Mom got 50%? If not, where did $$ go? It's going to be viewed as gifting & transfer penalty placed otherwise.
- 15k renovation - so you have a legit contract signed by mom before work started along with some sort of payment schedule? If not & mom pays you 15k, Medicaid will look at it as a gifting of 15k & transfer penalty placed. Medicaid tends to view whatever $ spent by family for their elders as done out of a sense of familial duty & for free. You'd need some sort of promissory note or memo of understanding signed & notarized ahead of time & and even then Medicaid could delay eligibility. Was this done???
- rentals - Medicaid allows for rentals BUT whether or not it makes sense is to me the issue. Must be at FMV rental rates & legit rental agreement. Rent is income & reported to IRS. Rental income ALSO must be included within moms Medicaid required co-pay or SOC (share of cost) requirement. So if FMV rent on house her size is $2k mo & moms mo income $1600, combined $ 3600 will take mom over Medicaid limit for eligibility; so renting doesn't make sense.
- if rented, Property costs (taxes, proper insurance, maintenance, etc) can be paid from rent with probably some sort of escrow like account opened for this & it too gets reported to Medicaid for initial application & renewals. Documentation to the penny on all costs must done.

For an elder wanting to keep their home & be on Medicaid in a facility can be done but in my experience, family pays & documents in detail all empty property costs from day 1 of Medicaid till beyond death OR the rental situation set up before Medicaid & rental math works. Either way heirs will need to deal eventually with MERP (estate recovery). How the "Living Trust" was done is going to be important in what happens.

Really schedule an appt with estate atty asap that all of you attend.
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I have to say that many many landlords got into serious trouble.

They had a house and thought to themselves..ah ha, I'll rent it for income. Not really having any experience of knowledge about it.

Ended up losing their shirts. Some lost the house too.

Being a landlord is work. It takes a lot of time. And you need to know what you are doing. Through the housing crash many people learn the hard way. It is not an easy or sure fire way to make money.

Ok...that being said....I agree with everyone, you need to be taking to an elder care attorney
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Bob, I agree with others above that recommend that you make an appointment with an Elder Law Attorney. You can search for one on this page https://www.agingcare.com/local/elder-law-attorneys. If you live in the States, just put in your zip code or Mother-in-law's zip code.

It just seem odd that an Attorney would recommend not selling or renting out the house. Does your wife or you or both have Power of Attorney regarding finances?
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Is the house part of the trust? Is it a deed-in-trust?
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What reason did the lawyer give for his instruction that the house was to be left vacant? Is this because while the mother has mental capacity (even if it's getting a bit wobbly but hasn't yet been thrown in the waste paper basket) her permission is required for any sale or lease of her assets? Otherwise, if it's just an outright ban, it seems highly counterintuitive; and in that case how does the lawyer advise that mother's residential care ought best to be paid for?
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Bob; I misunderstood what "rehab" meant.

But I will reiterate that you need a certified Eldercare attorney to sort this all out.

We have often found on this site that lawyers whose expertise is in other areas often do know understand the ins and outs of Medicaid, Miller trusts and other elder-related issues. It's really important to get that expertise on the team.
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Never occurred to any of us that MediCare would pay for home rehabilitation to make house rentable.. Ohhh.. Maybe my post made it sound like it was rehab for Mother In Law, physically.. No. It was the house itself....
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Why did YOU have to put up money for rehab? Was it not covered by Medicare?

I believe you need a certified Eldercare attorney on your team. Curious why trust attorney does not see income generation as a good thing.
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