Mom is in assisted living on Medicare. Owns home, tenant renting wants to rent to own. This is mom's asset and when Medicare runs out, Medicaid kicks in. Can I do a rent to own or do I have to outright sell it to avoid out of pocket expenses to pay for her assisted living? Asset is worth is $75K.

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You can check into a loan to the tenant for the purpose of purchasing the house. So mom would be kinda like Bank of America. Tenants/buyer own the house and pay mom a monthly mortgage payment against the loan amount. So she would essentially be the lender earning interest on the sales price and the amount "financed" by mom. This would help the friend get the house without having to qualify for the loan. Be sure and have a good attorney draw up a solid contract to ensure that mom is fully protected by law and has all legal recourse available and not given away in a bad contract. Always have a late fee, that way it doesn't adversely affect mom in her situation, i have found that it has to suck bad enough to not pay on time to encourage responsible timely payments. Making sure that mom is listed as loss payee should they burn the house down and writing into the contract what would cause foreclosure, ie unpaid property taxes that would involve someone else having rights to the property and insurance that would cover the loss. Either of those being defaulted on should throw the house into foreclosure. But a knowledgeable real estate attorney would know how to protect mom.

Then if something goes south, mom forecloses and gets the deed back. Or the tenants/buyers would be kind and do a deed in lieu of foreclosure and the deed would transfer back to mom.

As Igloo has said the sales price has to be at FMV. Interest rates are negotiable and I recommend getting a down payment that puts their dog in the fight.

Obviously this should all be dealt with by attorneys that can ensure that mom is being protected and getting the care she requires. Just a different angle to a potential solution.
Helpful Answer (1)

Schelk, not sure I understand what you mean...”I think her Medicare may run out December.”
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I think it’s going to be quite quite sticky to do.

Rental $ is income and if on LTC Medicaid basically almost all income is required copay to the NH. (Like Her SS $ is income and that too has to become a copay to the NH). But for rent, it’s “net” rental income that is the copay. Just what your state allows in “net”, you will need to find out exactly. Could be just property taxes allowed amortized over 12 months thats allowed to be kept by mom (so she can pay them). If what is allowed to be kept by her isn’t enough to truly cover all property costs, then just too bad & you will have to cover those or stuff doesn’t get paid. Which can jeopardize the Rent2own contract.

Rent needs to be FMV. Selling price needs to be FMV. Fair market value
& if rents are high where you live, then it can morph into her being over Medicaid income limit. Income limit set by your state. Most $2,100. So say your mom gets $1200 in SS and FMV rent is $1500, she will be over income for Medicaid at $2700 monthly income.

being “over income limit” can be dealt with but there’s stuff she’s going to need to do to make this happen. Just what depends on how your state runs Medicaid. Like if your in a Miller trust state, then mom does a miller on her SS income. (Rental $ can’t as it’s not qualified income).

it’s just not simple $ in then $ out. It’s sticky.

PLUS If mom goes onto LTC Medicaid, the house can become subject to a lien or claim on the property as Medicaid is required to attempt a recoup of costs Medicaid paid for her care (MERP). Some states have the lien done when eligibility starts; others have this as a post death placement. If lien placed & the rent to own finishes up while mom is still alive, title can’t transfer until lien is satisfied. If it takes 3-5 months to get this done, those renters are not gonna be happy. If you actually do this, you need to have the real estate attorney put in a paragraph as to finalization dependent on Medicaid lien release.

if R2Own still happening after mom dies, I think your going to have to open probate. If heirs open probate then all would need follow whatever system for assets of & claims against the estate for probate. The executor will need orders signed off by judge to move the house out of probate. Your real estate attorney needs to have a paragraph on this in the R2Own contract.

House needs to sell at FMV. If her tax assessor value is way above what Realtors comps show FMV to be, it can be an issue for Medicaid.

if they could buy it now at FMV, all would be way simpler.
if they can’t, & you cannot afford property costs if need be (like renters just move out or new roof needed) on your own once Medicaid starts, please think about putting it on the open market now with a Realtor & before ever doing her medicaid application.

if house is totally in her name, when it sells all $ is hers. She cannot gift you any house $. Getting reimbursed for house stuff you pay for will not be easy to do as it looks like “gifting”. She has $ so will be ineligible for Medicaid and goes back to doing a spend down again and then once impoverished again, you do another Medicaid application. I’m tired just thinking about having to deal with all this..... really if you, family, heirs do not really want house, do not have likely exemptions to MERP and don’t have the wallet & sense of humor to deal with the place, sell it ASAP & as close to FMV as possible & before ever submitting for Medicaid for her.

Those renters once they realize house will go onto open market with Realtor listing if they don’t come thru may, just may, come up with $.
Helpful Answer (3)

It will be counted as income and it would go to her care expenses, as it should.

Depending on her level of care required it may not interfere with eligibility but it will increase her share of cost, meaning she pays more and taxpayers pay less (aka Medicaid).
Helpful Answer (1)

Your Mom doesn't have to sell her home to qualify for medicaid; the home would be sold after her death and medicaid would recover monies spent from any future sale of the home. As to rent to own, I don't know that that is a good idea right now, as that contract would likely not work, and could even make Mom ineligible. DO see an elder law attorney about this. Hoping Cali is around and can perhaps answer this
Helpful Answer (2)
Schelk Jan 2020
Thank you for the helpful information. So that sell would count as immediate income for her according to medicaid right? She still has some time before all monies is depleted, just unsure of the right way to go about this. We do have an elder care attorney and will be asking. The tenant is unable to get the loan, so we were hoping to go the route of rent to own- she has been renting since August this year. So all of that rental income is counted as income according to Medicaid rules? Sigh... I think her Medicare may run out December. We understand that asset monies should go towards her care rightly so... tenant is very close friend so we were hoping to help her out by rent to own. But mom comes first of course.
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