Does the five year lookback law apply only to blood relatives?

There is no problem for the daughter to buy MIL's home, she just has to pay the fair market price for it, and the proceeds from the sale have to go into MIL's bank account, which will be seen by Medicaid, and the proceeds will definitely get used for MIL's care. I don't understand what the question is here. There is no way to hide anything....just sell the house, at a fair price. You can have a Professional Appraiser go thru the house, they cost about $300-450 to do a professional appraisal (this is NOT the same as a comparable properties analysis, which is what realtors do). Then have the daughter pay whatever the Professional Appraiser says it is worth, that should satisfy Medicaid. That $300-450 (plus the title search & transfer fees) is a lot cheaper than the 6 or 7% realtor fees.

Putting a house on the market has all sorts of costs from increased insurance to higher utilities to more yard care & staging to make it more price competive with other houses on the market. Plus having it listed for a set period with a Realtor & showings. Doing all this when endgame is to have granddaughter buy the house at lowest legit value probably IMHO not the best use of time or $.

Blind faith really needs to make sure to have all documentation all above board as the house is a within family sale and it sounds like they will be dealing with paperwork & eligibility standards for two (!!) different states on grannies eventual Medicaid application. It is probably not going to be a simple review for her to qualify. Really perhaps best to get inspection & appraisal & then speak with a NAELA certified attorney in the new state to see what sort of issues grannie will face in becoming eligible for Medicaid in the new state.

Whatever the case, Grannie needs to sell house (and document the proceeds from the sale spent down for her care or her direct needs) before moving to new state as owning a home in another state is probably a nonexempt asset for Medicaid. By & large their home is exempt if it qualifies for a homestead exemption, which it won't if in another state.

Surely the easiest way to determine that the house was sold at the true market value is to put the house on the market and sell it in the usual way. If your daughter then wants to buy it at a fair price, there's nothing stopping her and the whole sale process will be fully and independently documented.

What seems to be the # used to set the transfer penalty figure is the tax assessor value of the property. Tax assessor records all public data.

For homes owned by the elderly, often the property is not accurate for assessor value as was bought ages ago and has decades of delayed maintenance. Since their property taxes is often frozen, the increase in value over the years by the tax assessor has not been challenged to be lowered, so the assessor value is way way over true value. If this could be your situation, I'd suggest to get the house inspected (needs to be done by someone registered with license) & a report done & then get it appraised (also by someone registered with license) to get a true figure as to value. A comps report from a Realtor would be another good item to have as well - although you should make it clear that you are not interested in listing the property when you speak with a Realtor to do this.

MIL selling the property undervalue usually places a transfer penalty in which although mil is now qualified for Medicaid they are ineligible for Medicaid to pay for their care. The penalty period starts on the date of their application (& NOT the date of property sale) and is roughly based on a formula of what your state reinburses to a facility for day rate for room & board. If your state is a low medicaid reinbursement state (like TX), this could mean a long long time of ineligibility. Like TX rate is $ 155 a day; so a 50K transfer would mean 322 days of ineligibility. That is a long long time that someone will need to private pay for MIL in a facility. It doesn't matter if it's you & hubs or your daughter that pays for her stay but Medicaid won't. MIL is impoverished so she has no funds, someone will either have to pay or move mil into their home for her to live till the penalty period is over.

If a transfer penalty inquiry is done, you can likely expect that the caseworker will want additional documentation on MILs application. One item done incorrectly means others have been done as well.......

If penalty done, the facility will get a letter from medicaid on this as well. They are going to want family to sign off on a contract to pay for MILs stay and settle all past due. If not, mil gets a "30 day notice" & as mil is not on medicaid the safeguards on placement to another facility required by medicaid is not there. Facility will turn over her debt to collections most likely.

Transfer penalty on real property is really hard to get around as the info is just there and down to the penny.

Medicaid will look at comparable homes in her area to determine whether the house was sold at fair market value.

All transaction within the 5 year lookback period will be looked at. If the house is sold under market value, there probably would be an additional penalty. Your MIL will still have to spend down what ever money she receives on her care before Medicaid will cover her. Remember Medicaid is for people that are impoverished

Thanks again MaggieMarshall! What will prove to Medicaid at time of the lookback that the price of the house sale was indeed at fair market value?

That is correct.

Thanks MaggieMarshall, so it's triggered by an under market house sale regardless if it's sold to a relative or not?

It applies to your MOTHER-IN-LAW. The five-year look back will examine all of her assets and the disposition thereof for the past five years. Any transaction, especially the sale of a residence, will be subject to scrutiny. Selling it under market will most assuredly trigger a Medicaid penalty to recoup the shortfall.