My husband's Mom donated house and land to the 6 kids 4 years ago. Can kids sell house in 5 years?

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She has usufruct for life but stays in Alabama. Will Medicaid be able to decline her due to the house? Can Medicaid get funds from the house if the kids want to sell it after the five year waiting period?

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In addition to all of the above... Are you aware that the 'donated' (gifted) home's (property) basis to you is what mom's (or parents) is? For example, she (they) purchased years ago and their cost basis (purchase price plus capital improvements) is say $30k and now it's market value is $150k. Oooops! You must use her basis of $30k and will pay capital gains tax on the sales price difference. ADDITIONALLY, when the property is 'donated' (gifted), the transaction is also subject to federal gift tax rules. Legally she (they) is supposed to file a Gift & Estate Tax Return with the IRS. And IRS is starting to crack down on this area because so many have been ignoring it. Too many have been doing everything possible to make mom & dad the government's expense problem so they can 'get their inheritance' before it has to be spent taking care of mom and/or dad in their last years.

I get it. You think 'Screw the government, they're not going to take My money.' Inheritance is nice, but it's mom & dad's money for their's for their use and not yours unless or until something is actually left over. And too, you're actually saying 'screw you' to me because I'm the taxpayer helping to foot your mom's bill before it was necessary.... :(

Like I said, I 'get' your attitude. Health care costs for elders are godawful. But I still find hiding mom and/or dad's assets for your own personal enrichment disgusting. Medicaid was designed and implemented to help when its necessary, not to put money in your pocket because you feel entitled. If all of this sounds self-righteous, then tough. Some of us try to do things ethically.
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If the quitclaim deed was not filed with the county, it never happened as far as Medicaid is concerned. Verbal agreements mean nothing to Medicaid either. Shortcuts always come back to bite you in the axx.
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Why do folks go to such lengths to avoid proper procedures. The kids will not inherit the house, upon sale taxes on the sale price must be paid.

Had an Irrevocable trust for the house been established a valid transfer date is on record and the tax exemption is probably, retained.,
That trust CAN be formed with out the high cost of the 'packaged' Estate Planning bundles, especially prevalent in the Metro Atlanta GA Market.
such as being those being
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Psteigman - I think it is that medicaid doesn't refuse them from the program. What Medicaid does is evaluate the application to see whether they currently meet the criteria for medical & financial for Medicaid in your state. So if they do, then they are in the Medicaid program - they are accepted by Medicaid. They don't need to reapply for Medicaid once the transfer penalty is paid.

BUT although they are accepted by Medicaid, Medicaid will decline to pay for Medicaid share of their care until the transfer penalty is paid. Because they are still in Medicaid, they still have to do the required monthly co-pay to the NH. Their medications and other costs (like OT, PT) will be billed at the lower Medicaid rates too as they are still accepted by Medicaid. The transfer penalty seems to revolve around paying the daily room & board charge which is a fixed charge. Whomever is paying the penalty pays the NH the r&b charge to pay off the penalty. The NH can bill at the Medicaid rate (which is lower) or their private pay rate (which is higher) - it all depends on the NH contract. At my mom's old NH, the transfer penalty private pay rate was like triple what the Medicaid reinbursement rate was. Not that the care was any different. That was what the contract read.
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Ruggles - that is all good news!!!! So everything done, filed and changed in the courthouse - then it is all yours. You have to wait a full 5 years before you can sell the property AND file or submit the Medicaid application. If you do it now, there can be a transfer penalty inquiry done.

i'm assuming mom is needing to go into a NH and she will be applying for Medicaid. The property may or may not show up in the initial review of the application @ the NH but when the NH turns the application to the Medicaid caseworker, they can do a property review. Now all real property (cars, land, homes) is all recorded by the county and then dovetailed into the state system. It will show up eventually - I had a issue with my mom;s car and it was at the edge of the 5 year mark. All this is an easy data match up and will be found out eventually.

Most applications clearly state that you have to disclose any real property transfer done in the past 3 or 5 years. You sign off with full penalty to be done if you omit something. So just to not have to deal with this hot mess, I'd wait on applying for mom till after 5 full years plus 60 days.

Transfer penalties are super sticky and there is a whole formula each different for each state as to how it is determined. Your state's Medicaid program probably has all this on-line (for TX it is and it is just impossible to figure out). The penalty is basically based on the reinbursement rate for NH room & board Medicaid rates in your state and the value of the transferred asset. That is where it gets sticky as some states seem to have the property based on it;s value at the time of transfer while others do it based on the value at the time of the application. Unless you have licensed appraisal of the property at the time of the transfer, they go by the tax assessor rate - which could or could not be accurate. 5 years ago would be 2008/09 & property values were still in the go-go real estate era for many areas of the country. Not good for making a case for a lower value. A hot mess to figure out.

Personally, I'd figure out how to either keep mom at the house for a bit longer or private pay the NH for mom so that the application is done 5 full years and 60 days from the date it was officially recorded at the courthouse. That way no possible issues in lookback. Good luck.

Just to be on the safe side, I'd draw up a "rental agreement" or "tenant agreement" between the property owners (you & Sissy) and mom (the renter) stating speciically that mom is responsible for utilties, yard, etc whatever you would do for anyone renting the property. Get it notarized - many UPS stores are also notary sites, so maybe call about to see if they do it that way in your area.
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YES Medicaid will refuse her and impose a penalty equal to the value of the house, unless she stays out of a nursing home for the next five years. Adding to the confusion, the NH themselves may impose a lien under Filial Responsibility laws.
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My mother did a quitclaim deed with her home, and it has been officially in my sister and my name for over 4 years. We made a verbal agreement that she can live in the house as long as she wants, with the agreement that she would be responsible for the day-to-day maintenance and the utilities. Are you saying that having the utilities in her name can affect the look back period? As far as I'm concerned she is a tenant and tenants usually have the utilities in their name.
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Pineapple - so much of this will depend on what exactly & how the "donation" was done. And how the usufruct reads (my DH & I have usufruct in our wills).

The big ? (imho) is how was the property transferred to the kids......like does the tax assessor & other legal on the property show that it is in your names....so that nowhere in the current legal on the property does mom show up as the owner?

This could have been done as a full quit claim (or a warranty deed) from her to you all, fully notarized and then properly filed in the county courthouse. So that for the past 4 years everything on the property (& I do mean everything like insurance, utilities, etc) is now out of mom's name. Then most likely in another year and a couple of months, the property can be sold with none of it as an Medicaid "asset" for mom.It is fully after the 5 year look-back. Mom doesn't own it anymore.

BUT, I'll bet a Bushwacker @ the FloraBama, that mom did all this as a life estate with her having a usufruct on it. If that is what it is, you need to meet with an elder law attorney to review just how the life estate (LE) was done and how the property is structured for being her "asset" under how Alabama does Medicaid. The LE paperwork could have even been filed @ the courthouse and so will show up in Medicaid review and will be sticky to deal with too...so again the attorney can help with that. LE can be revocable or irrevocable. Often the LE will be done so that mom still owns the house (and takes advantage of lower taxes & other costs due to her being a senior) but places it in an LE for the kids with her having a usufruct for her life-time on it. So she still owns the property until she dies but since it is a LE it doesn't pass through probate after she dies. The LE was done to avoid probate. But depending on your states law, the LE can be viewed as a full asset for Medicaid as she still owns the property. The LE doesn't always avoid Medicaid. IF the property is sold, the proceeds from the sale is an asset of mom's and is fully expected to be spent-down for her care by Medicaid. Medicaid will find out as all real property records are in the state's database and a simple search will show mom's name & the property.

About the attorney, I would get one who is NAELA certified for your state. THis site has a drop-down list to find one. If all this was done as a LE, well....not all estate attorneys are experienced on elder law as it works for Medicaid. They are geared to estate planning which often is about avoiding probate or taxes. Not the same as Medicaid planning.

I'm in LA & LA allows for usufruct like AL does. Most states apparently do not recognize usufruct. My DH & I have one in our wills to deal with property owned before we got married. Usufructs are pretty useful tool. One reason why many from New Orleans buy a 2nd at Fairhope, Dauphine I, Gulf Shores is because the LA usufruct is recognized by AL law, so easier to deal with.
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