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Dad is declining, but is aware his grandson would like to buy the house. If he did, dad's great grandson would be the 6th generation to live on the property, so we're all kind of excited for that to happen! We are aware vacant properties cost more to insure, and fair market value in the inflated housing market may make the mortgage too large for grandson to afford. We didn't think until after we spoke with the attorney to ask if he could caretake the property until it needed to be sold, or if rent to own could be an option. We have enough cash to afford dad's first month of NH, and then hope he may qualify for Medicaid, using the sale of the house to repay that when he passes. We are not trying to hold on to money or inheritance, we want to keep family on the homestead. Any suggestions?

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If grandpa keeps the house, it is an exempt asset under Medicaid. A lien will be placed on the home that will be satisfied when grandpa dies.

If grandpa sells house to grandson, it must be at fair market value and then that money funds NH stay until it runs out. The grandpa becomes eligible for medicaid.

I would go back to attorney and get his State-specific advice; some states have homestead exemptions.
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Nonnie Nov 4, 2020
The attorney is looking in to a few things and will be getting back to us this week. I had not heard of a homestead exemption before. I'm not sure what that would entail. Thank you!
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Is the attorney an elder law specialist? The house could be rented at market value. If sold now, must be at market value. I can't understand waiting to sell until passing, The cost of the home is going to increase. With cash from the sale self pay will be possible for a longer period of time. Family member wants to buy now, why not now? Family member could change his mind in a couple years then you have to search for buyer.

You don't want to leave the home vacant insurance will be very expensive, and someone other than dad will be responsible for that expense.
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Nonnie Nov 4, 2020
It does make sense to sell now, to us too, and we may have to for all involved. The market in our area has almost doubled recently, and though it may flatten, I think you're right in saying housing prices will only go up. The attorney is an elder law attorney. I really just want to understand it all a bit better.
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You should see whether grandson can inherit the house (as written below). That is great advice about taking advantage of the stepped up basis. Your dad must be of sound mind, though, to change his will. The more sound, the better.

it would be nice if grandson could live there as a property caretaker or grandad caretaker in the meantime, as extensively discussed by others.

Is grandson your son? Are there other grandchildren? Be careful. A lawsuit could be ahead.

Tread carefully—you, your brother or the grandson, could be accused of undue influence by other heirs. The other heirs might be fine with the arrangement now, but change their mind later.

Your Dad should make the calls to the attorney, no one else. If you drive him to see the attorney, no one should go in the office but him. It’s even better if he can get there in a taxi. (There is plenty of caselaw that looks at who dialed the phone, who all spoke to the attorney, who drove an individual to the attorney’s office). Be careful with e-mails. These are written communication that can be used as evidence.

I thought I had the closest family in the world until a couple people sued me (both as executor and personally). I won completely, but the legal bills were expensive And the process was devastating. Lawsuits can be a perfectly legal way to emotionally abuse someone - avoid this if possible.
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I would stick to the options left you by an attorney as regards the house. It will likely be sold upon Dad's death for medicare recovery. I would head back to that lawyer and tell him or her exactly what you told us. As far as meantime the grandson renting the place, that would be income to Dad, and may prevent his qualifying for medicaid. Caretaking may work out better; again, this is something, given Dad's need for medicaid, that should not be asked and answered on a Forum. Different states have different rules given medicaid is a joint federal and state run program. Just run this by for another half hour time with Lawyer, perhaps only a phone consult. You can't afford to do these things wrong. Best of luck. So many generations in that one place; kind of heartbreaking to not be able to see it go down, but Dad's assets do stand to pay for his care. Hope you will update us on what you find out. Forum is here to help folks with information and our own experiences.
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Nonnie Nov 4, 2020
Thank you. It's bittersweet all around, and we're hoping for the best outcome in every aspect of the current situation. We will he talking to the attorney again soon.
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Only take full advice on any of your questions from the Elder Law Attorney or you might find yourself following the wrong advice and it could get you in real trouble in more ways then one. When working with the Elder Law Attorney you do not need to worry about anything coming up out of the woods to get you.
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Nonnie, GvMercy point about Lady Bird Deeds is important. But they are available in only a handful of states. You need to ask the atty IF they are an option for your dad.

One thing to keep in mind should your homeowing elder go into a facility & onto LTC Medicaid, is that from Day 1 of Medicaid application, all their monthly income basically must be paid as a copay to the facility. All they get to keep is a smallish PNA personal needs allowance that tend to be $50-$60 mo. All property costs - taxes, insurance, etc. - will fall to family to pay till he sells it or beyond death should he die still owning it. If he sells it, he cannot easily reinburse you for those costs as it looks like “gifting” from him to you. Talk with atty clearly about this and if anything needs to happen before you pay a penny on house.

Now for some states, if the property is empty, the costs paid by family to reasonably maintain it, can be deducted or excluded from the Medicaid estate recovery tally (MERP). But you have to keep all documentation on this and then deal with MERP on this after death or file as a claim against the estate if dad keeps the house till death and it rolls into an asset of his estate.

Also there are all sorts of other exclusion and exemptions to MERP. It’s not just caregiver exemption. Right now, it’s you and your brother as the only heirs, right? You might want to look at IF either of you would qualify for exemption. Like handicapped heir, low income heir. If bro qualified for 1 but you didn’t, his 50% of the value of the home gets excluded from value for MERPs interests. If 1 of you have an exemption, it might be better for dad to continue to own the place, keep his homestead exemption and those benefits; it gets mothballed to decrease maintenance that you & bro pay; and you wait it out till after dad dies to deal with it in probate and you 2 heirs sell that generations old land to nephew. This does involve risk as could be 5 mos or 5 years and you have to have the wallet & humor for it.

Also I’d suggest that you get the property inspected and appraised. If the tax assessor value is somewhat whack, you want to be able to legally counter that value. Both for getting assessment lowered (like whenever your area schedules tax protests) and for whatever recovery MERP attempts to do, AND for possibly selling it to your nephew for under the current tax assessor value and any Medicaid FMV issues.

One thing I’ve found over & over is that elders, since their property taxes tend to be “capped” or fixed, is that they don’t ever file a protest to have the tax assessor value lowered to its realistic value. So it’s way way over. If they end up applying for Medicaid, when it finally gets sold Medicaid is going to do their best to make them or DpoaDPOA sell it at FMV based on that assessor $ amount. It can cause delays or kill deals as there’s often too too big of a gulf in assessor value and what it can really sell for.
Getting it inspected and then appraised helps to get through this. Both are documents with a seal and tied into professional licensing. It’s full legal. Like it can be entered into probate and if it’s 75/100k less than tax assessor, it doesn’t matter; it goes in as appraised value.

please please make sure that Medicaid will cover AL & MC; AND if not and it’s only SNF for Medicaid make sure that he can qualify to be “at need” medically for LTC in a NH/SNF. Medical just as important as financial for Medicaid eligibility.

really go over stuff in minute detail,with the atty. Good luck.
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worriedinCali Nov 9, 2020
Lady bird deeds are only recognized in 5 states and the OP isn’t in one of those states. Her state, Washington, does have a TOD (transfer on death deed) but I don’t know if that would prevent MERP from taking the house?
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Our area has an inflated real estate market right now, I don't think that it will continue to go up but, who knows what it will look like in a year or even 6 months.

I would ask a certified elder law attorney (www.nelf.org if you are not happy with your current counsel) if you can do a contract with the grandson, where he lives in the house as an unpaid caretaker, free rent would be the compensation, yet he covers all the expenses; including insurance, property tax and of course utilities, as well as home maintenance and any other costs associated with the house, in return for a first right of refusal. You can not rent it to him because the money received could disqualify grandpa from Medicaid and all of the money would have to be paid for his care, meaning none of that rental income would be available for paying insurance or property taxes.

I would also get an appraisal done now and then another one when it is time to buy. Just for my personal comfort of knowing that the house has been well maintained and the value wasn't driven down by the actions of anyone living there. Nothing against your family, mine has taught me how to protect myself.

If the house is sold now, grandpa has to pay the private pay rate vs selling after death and reimbursing for the Medicaid rate. It seems to me it is an average of 3 times the rate for private pay, at a minimum. So I think that the attorney is thinking about this correctly. I don't see how Medicaid could care about the price after grandpa is gone, as long as their lien is satisfied 100%. Ask the attorney. Because once the lien is paid in full they can no longer demand anything.

If there is a huge disparity between selling price and assessors valuation then there may be an avenue available to the estate to satisfy the lien and get Medicaid out of the picture as far as the sale of the house. Allowing the family to sell it for whatever they choose.

I hope that wasn't completely confusing. It sounds like your attorney knows what s/he is doing.

I hope this all works out for your family. I am sorry that you are having to place your dad. It is not an easy decision.
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Nonnie Nov 4, 2020
You made me cry! You have helped me to understand a lot better, just by understanding me. I think we just need a bit more time; the grandson to buy the house, and my brother and I to wrap our heads around it all. If he could caretake through the winter months it may help the grandson save enough for a larger down payment. Thank you again, we will be better prepared next time we talk to the attorney!
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As long as the grandson isn't looking for a "good deal" or family "discount". I agree with other comments about seeing an elder law specialist who is familiar with estate planning and Medicaid for your father's state.
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Nonnie Nov 4, 2020
We have, and he is not looking for a handout. We're just hoping he can afford it, and to see if a rent-to-own option was something he could look into.
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Not mentioned here elsewhere, there is a tax consideration if you can find a way NOT to sell now, and instead, allow the grandson to INHERIT the property.

When a property is sold, capital gains taxes are calculated on the sale price minus (the purchase price plus any allowed improvements)...

When a when a property is inherited, the value is "stepped up in basis" to the value of the home at the time of death of the owner.

Example: if the last sale/evaluation of record was 30 years ago, at $50,000 + $40,000 in improvements over the years, but the current market value is $600,000 - - the capital gains tax on a sale would be based on...

$600K - $50K - $40K = taxed on

$590,000...

But if the owner passes away, the basis is stepped up, for the new inheritor, to $600,000 - - and the value is figured into inheritance taxes rather than short or long-term capital gains.

If if the value of the home was under the inheritance limit, and if there were no other inheritances, then there would be no federal or state income taxes on the home as inherited.

The the difference can be substantial...

The MERP recovery can also be avoided if it is proven that the person was kept in their house for a period of 2 years, with caretaking (done by or supervised by the grandson, for example), even if the person subsequently goes into Medicaid care after the 2 years, and that provision is included because two years worth of State Medicaid were saved by the home caretaking...

You you have options that all need to be considered - - don't jump at anything, but it's obvious that there is great importance in maintaining the family land, and I'm sure there's a way to do it.

There are real estate attorneys, Medicaid attorneys, probate and family law attorneys, and they all know different things, so you really have to do your homework.
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Call the attorney back. He knows the rules in your state better than the rest of us. If dad's money is going to run out that quickly that he may qualify for Medicaid, it is very possible the house is going to be addressed in the MERP form that will be signed when he gets on Medicaid. It is a reimbursement to the state for what they paid for his bed and comes out of whatever is left in the estate at the time of his death - ie, the house if not sold. Not all states pursue the property even though they are entitled to do so.

That may be why atty told you not to sell yet. If you sell now, and give the relative a bargain versus fair market value - that is the same as gifting someone what you could have spent for the NH bed. Dad gets penalized where he has to come up with the money for his NH bed for the number of months equivalent to what he gave away.

Talk to the atty - it will be well worth the price to handle this the right way.
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