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We are paying all the utilities, his food, taxes, etc. Nothing is in his name. He has his own living space, bedroom and garage. He would like to pay me rent on a monthly basis, but I am concerned this would affect the Medicaid look back period if he needs nursing home care in the future. Does anyone know if this can be done without affecting this? Would this be considered a gift since it would be on a monthly recurring basis? He is in decent health now and is independent.

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No, it would not affect Medicaid. If he was living in an apartment paying rent or paying a mortgage on a house it would not affect Medicaid eligibility on the five year look back period. No, this is not a gift. He has his own place on your property. His rent includes his utilities and meals. Accepting rent from him is not a gift. It's rent with utilities and meals included. Draw up a lease a rent agreement and state what he will be paying monthly and for how long. When the lease time is up it is within your rights as the property owner to go up on the rent a certain percentage if you want. Landlords do this all the time even when their tenants are family.
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Reply to BurntCaregiver
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I would get an elder attorney to fix an appropriate contract so there are no surprises when Medicaid is needed. Don't get your legal advice here. Things like this can vary from state to state. You would definitely need to find out what kind of recordkeeping is involved and how your 'income' would be reported to IRS
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Reply to my2cents
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Medicaid does not expect them to live on air. Rent paid or a Personal Services Contract are both ways for him to legitimately pay you without issues from Medicaid later on, BUT, which is better kinda imho depends on your own finances and tax situation. Like if your young and still need to build up your own future retirement, a personal service contract might be better as dad pays you with FICA done and your Work history gets built up each pay period so it’s more $ for when you eventually retire and draw SS. But if your already retired and getting SSA, I think outside income gets taxed if it goes over 14k, so you probably don’t want that.... so for this scenario getting paid rent is better. You do need to file IRS forms related to rent too so it’s all above board legit.

Evanders suggestion of getting a Realtor or Rental agency to give you a comparable rental is an excellent idea.
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Reply to igloo572
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He can deffiently pay a fair price for his room and board without affecting anything as he rightly should and check with your Tax Person, but you should be able to list him on your Tax Return as living with you too.
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Reply to bevthegreat
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This is advice from my elder lawyer. I could either have a caregivers agreement or a rental agreement. He said a rental agreement would be easier. He advised me to have a realtor or rental agency to assess the space my mom was occupying in my house. A bedroom, sitting room, bathroom and access to the rest of the house and porch plus includes her share of utilities. Have him give you a letter on his letterhead stating what the fair market value is. I opened up a separate checking account where the money is transferred right over from her account where her social security is deposited over to this new account in my name. I also claim it as income and pay taxes on it. I called The Medicaid office and asked them if this would be acceptable. They said yes as long as I have all the documentation. I get $875 a month. I live in SC.
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Reply to evander09
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Yes, I would have an agreement drawn up by a lawyer. Stipulating how much he will pay you monthly. Signed by all parties and notarized.
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Reply to JoAnn29
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You should have him pay his share of costs, that way it is not taxable income to you, yet a completely legitimate expenditure for the look back. Medicaid expects people to have monthly living expenses, so you should never create a personal tax liability to have a loved one pay their own way.

You would figure out what the house, utilities, insurances, taxes, food, etc. expenses are and have him pay a third or half. He can make payments to the utility companies and insurance companies directly, buy the groceries and other items so that it is obviously not a gift. Or he can withdraw cash and pay you that way, if you do it that way, keep a record of how the cash was spent, so rent $xxx, insurance, $xxx, power co $xxx and on and on.

If you would like additional information on how to do this please private message me.
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Reply to Isthisrealyreal
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Yes, should be paying you rental. I would draw up a contract. I would report this rent as income for taxes. This will make it somewhat bullet proof for medicaid lookback. Do see an elder law attorney for one hour. That will be money well spent from your father's assets to insure all is well done and you understand it.
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Reply to AlvaDeer
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Brja001, in general your father paying you "fair market" rent should have no effect on his possible future need for Medicaid eligibility, assuming you have good documentation for how "fair market" was determined. But be aware that the "net" rent you receive would be reportable as income for tax purposes. Paying fair market rent is not considered to be gifting, whether it's on a monthly basis or a longer term lease.

Alternatively, he could gift you up to $15,000 per year without affecting either your income taxes or his need to report such gift to the IRS or affecting his lifetime gift tax exemption. Of course, as you know, such gifts could affect his Medicaid eligibility if he needs such assistance within five years of gifting. The Medicaid ineligibility period for such gifting would be be determined by the cost of care needed and the amounts gifted, so you could save his gifts to you to help him through any future ineligibility period.

Although Medicaid is a federal program, each state has different specific rules, so it's usually a good idea to get advice from a Medicaid expert with experience in your state before you make any irreversible decisions. Best wishes.
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Reply to bicycler
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TaxPreparer Oct 18, 2020
If the rent is low enough, there could be no net profit to tax. I am not able to give precise numbers as your utilities, mortgage interest, etc will differ from someone else.

Bicycler raises some important considerations. Charging him rent can 'open a can of worms' so to speak tax wise. If nothing else, your tax return would best be prepared by someone with experience. (i.e. It would cost more to prepare.)

First, I would start using his income to directly pay his expenses. I.e. Use his checkbook or card to pay directly for his groceries and care items. Use his checking account to pay one of the utility bills directly. Same If you need to pay for someone to assist you with his care, etc.

If there is additional money beyond his direct expenses, consider things like paying rent to you.

Note: I am a tax preparer, not a elder care planner so take the following as opinion concerning medicaid: I believe re-imbursing you for expenses you have incurred to date on his behalf would be reasonable. However, you might want pretty solid documentation especially if this is a large amount. Writing you a check looks a lot like a gift on paper.
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