Can I buy my grandmothers house for under market value, if Medicaid takes the house?

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From IL, My grandmother had moved into an assisting living center. My dad has owned the house for 3 years. He wants me to buy it for under market value.

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Medicaid does not "take" the house. The state run Medicaid program is not in the real estate market. But Medicaid requires the applicants income and assets to be used first & foremost for their care (before the state will pay for them) for 5 years prior to the Medicaid application. If gran gave your dad the house, rather than sell it (whether to dad or to someone else) and use the $ to pay for her care, then it is a problem for Medicaid compliance.

If funds have been inappropriately done, then the state can place a transfer penalty on the applicant based on the amount of the $. If your gran, transferred or gifted the house to your dad 3 years ago, there will be a penalty on her doing this. The value is usually based on the annual tax assessor value on the property (land and improvements). The assessed value is in the county and the state's database so they will know the amount and when it got moved in ownership. Then that value is worked into the penalty formula based on your state's reimbursement rate for Medicaid room & board @ a NH. So for example, TX reimbursement is $ 145.00 a day and the house was worth 85K and she gifted it for -0- zero dollars. Then the penalty period of time would be about 590 days that gran or her family would have to private pay for her stay in the NH before Medicaid would pay. The NH fully expects to be paid for her stay & if she doesn't then they will send you all a "30 day notice" for her to leave. Once a Notice is done, no other NH will take her either unless she is private pay.

Now if gran has applied for Medicaid and this was not disclosed - this is going to be a problem eventually both for grans's approval and continued re-certification for Medicaid AND for the legal status on the house. Medicaid is required to try to recoup the costs spent on her care by getting any assets gran had. This is done by their ability to place a claim or a lien on the property (how this gets done depends on your state laws). But whether it's a claim or a lien, it will cloud the title on the property when it goes to be sold or you go to get a mortgage to buy it or you all go and use the property as collateral for a loan. The claim or lein will show up in a title search and until it is lifted (paid), you cannot get a warranty deed.
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How did your father acquire the house? That is the transaction that would be of interest to Medicaid. What he does with it now should have no relevance to the Medicaid application. It no longer belongs to your grandmother.

Medicaid is not in the business of taking houses. Even when there is an issue, it might create a penalty situation, but Medicaid would not take the house.

Is an attorney who specializes in Elder Law helping with the application? The transfer of the house to your father should be discussed with that lawyer.
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