Both parents with dementia are in assisted living. We want to sell their home for taxable value. Will there be a penalty?

It depends. Sometimes taxable value is below market due to elder, disabled, or veterans exemptions. You need to consult an attorney certified in elder care and Medicaid to make sure. If selling below market to family or friendship? Big problem for Medicaid. You also need to make sure you track money to prep house and sell. Your parents may not be competent to agree to reimburse you. Talk with a lawyer. It’s covered under Medicaid spending rules for parents too and not seen as gifting.

tbrands, I am not familiar with Arizona long-term care insurance. Is this an insurance offered by the State? If yes, are there rules regarding how much money one can have prior to purchasing said insurance? Or rules about pre-existing illnesses?

Why not sell the house as a "fixer upper"? That could attract a lot of DIY buyers. I did that with my Dad's house, but first I got a licensed Appraiser to give me a value on the house. Our tax value doesn't reflect market value, market value is a lot more.

I would get a consult with an Elder Law attorney who is very familiar with the Medicaid laws in your state, before transferring any assets for seniors, who could need it down the road. Selling assets and how the proceeds are spent could have major consequences if they have to apply in the future.