We want to sell her home & no longer rent it. Our idea is to have mom sign the deed of the house over to my sister and then sell. My sister has the "life estate" since April 2012 (over the lookback period). Are all proceeds of the sale free from Medicaid and nursing home?
Although your question says that your sister "has the life estate" it seems like you really mean to say that your sister has a "remainder interest" in the property and your mother is the Life Tenant. (It sounds like that's what you mean, because you are aware of Medicaid's 5 year Look back period and you explain that your mother transferred the interest to your sister in 2012.)
This is a situation where you don't want to rely on guess work or make decisions based on what you read online. Visit an Elder Law Attorney in your state who can handle Medicaid planning and real estate transactions.
The Attorney will explain the regulations in your state, and the percentage interest owned by your sister and your mother. (The % is based on your mother's age, which determines her actuarial life expectancy. The % gets smaller with every birthday.)
Once you understand how much value from a house sale would be assigned to your mother (and be required as private payment for care), your family can then make a decision about the timing of the sale, or whether you want to keep renting the property. (As you said in your question, any profit netted from the rent is income to the Life Tenant and goes to pay for care).
Having an Elder Law Attorney on your team will make the transaction easier to explain to your family, the broker and buyer of the property, and the Medicaid agency in your state.
In my state (Massachusetts) the Medicaid agency and the State Auditor review Medicaid files years after a transaction has been completed, using bank and income tax data swaps that filter through their systems. To avoid the anxiety of wondering whether the transaction was properly planned, get the peace of mind that an Elder Law Attorney can provide if you receive an inquiry notice years from now asking about how the real estate proceeds were distributed.
Home with a homestead exemption is a exempt asset for Medicaid if under the max limit for property value for your state. Most have it at 550k but some east coast states have it higher, like 750-850k. Working farm or ranch also can be an exempt asset even if huge, like dzs of sections. The applicant gives the info on the property in their application but they do not have to sell it. The LTC Medicaid recipient signs some type of annual reasonable right of return document to keep it exempt & updates info on property in annual recertification. Elder can continue to own property, but due to Medicaid required copay of basically all the elders income, there’s no - none - nada - zero $ to pay ever again. Working ranches probably can cover operational costs. But private homes can’t, so family has to pay property taxes, insurance, utilities, repairs etc.
And that is the rub..... The issue will be if family or heirs have the ability and want to pay the property costs on the exempt asset for an undetermined period of time and beyond death and deal with MERP & likely probate. If there’s a pretty good expectation of having solid exemptions or exclusions to MERP / Medicaid Estate Recovery program, keeping it can make sense.
Renting it can cover the costs on the place but Medicaid is gonna want market rate rent with most of the rent included in the copay to the NH.
Personally I think keeping elders home works if it stays vacant so you have costs & upkeep minimal and it is either low value or right at the edge of max value allowed and you fully plan to open probate to settle the estate. And home has no debt, no mortgage, no secured lending on it at all.
Also mineral rights that pay oil & gas royalties can be exempt assets. The dividend or royalty paid IS counted for Medicaid. But you have amortization done for the year on it so it doesn’t throw income off for the month it’s paid. It’s common enough that o & g $ are actually a question for recertification for TX Medicaid. Unless it’s a new fracking field, it’s gonna be an old well that’s almost dead or pays under $100 yr.
So home owned by your mom, who is on LTC Medicaid, was put into a LE in 2012 which has the beneficiary for the property as your sister. That is it right? If so, my understanding on Life Estate is that the property titled into the LE remains owned by your mom until her death and then & only then does it transfer to whomever is named to be the beneficiary aka the after death owner. Right now it’s hers & if she sells house, its $ to her, AND to your Sister who has an interest in the property as she is the “remainderman” on the LE. Figuring out remainderman is based on the beneficiary age and sale price; IRS has tables on this. But personally I don’t think it’s a DIY but rather needs a CPA, real estate or tax attorney to figure out precisely for both mom & Sissys taxes.
Please look at last property tax bill.... if it reads your moms name, say it’s Anne Smith Jones, LE at $145k value, then it’s still your moms 145k exempt asset for Medicaid. Mom owns it & does some sort of right of return document so it’s exempt asset for Medicaid as long as it’s her’s. But if she sells it, or transfers it to another person, there is a value to that action which will affect her current Medicaid eligibility as $ from sale is not exempt. If she sells it, it kinda needs to be close to its overall value and sold at an arms length sale. So no special deal to a nephew for 80k as that means 65k gifting. If she gifted it totally that would mean transfer penalty of 145k against her. Sale or gifting, either mean Medicaid will not pay anymore and she goes private pay to stay at the NH.
I bet the “beyond lookback period” if actually is true probably means that when mom dies the property can transfer to Sissy without any MERP / Medicaid Estate Recovery issues as LE was done over 5 years ago for how Medicaid runs for your states rules; It is good only IF she dies with house still being in LE that it’s outside of any Medicaid issues. This would be kinda unusual as LE now aren’t exempt from recovery for most states Medicaid programs. Before you sell it, please clearly find out from Medicaid what selling before your mom dies means.
Realize if house sells, She will need to spend down the $ till she is once again impoverished for LTC Medicaid (2k for individuals). If it’s worth a good amount, it may be enough to have her private pay till she dies. She cannot gift any of the $ to family if Medicaid is involved. She cannot easily reimburse you for costs you all paid on the place as that looks like gifting. If there was some sort of notarized & witnessed memo of understanding as to how costs reimbursed to family done years ago, before Medicaid, maybe that might work.
To make the LE work, to me, mom needs to continue owning it. You all gotta keep it, pay whatever property costs are, keep it rented to make that all feasible and then once she dies, then have it transfer to Sis as per the LE.
Is this is being considered because family cannot afford property costs? If so either rent needs to be higher to cover costs or Sissy that’s inheriting the place needs to be paying costs.
Is that feasible?
Here’s ime what’s likely happened....
mom went into NH having her home as exempt asset & mom ok for “at need” financially for Medicaid . That it’s an LE is NOT a factor for eligibility; LE is after death so forgetabtit 4 now. At some point it’s rented. All still ok for Medicaid but % of rent copay to NH. If rent to NH, Medicaid has this lil’ factoid on its radar. So it’s Rent copay in addition to mo. income mom gets (SS$, dividends, other retirement $) as that too is required copay to NH. Once on LTC Medicaid all mom could possibly have for $ is her states PNA (personal needs allowance). PNA varies by state w/most $50-60 mo. Mom has no real $ anymore.
But rental covers property costs.
Then something happens w/renters. I’d guess initial ones move & Sissy realized that she can tell NH & Medicaid this; so going forward no rent $ due. But Sissy rents & pockets $.
State does annual recertification that requires maybe last 4 mos of banking records & info on rent & submission in 14-30 days or becomes ineligible; OR finds out that it’s actually rented as state has search program to ferret out this stuff w/rent $ due in 30-60 days. AND the NH has been CC’d by medicaid on this. Either way, in the words of the talented & handsome Ricky Ricardo “sissy jou gots some esssplainin’ to do”.
Sissy can’t. Sissy doesn’t have $. Plus property taxes due.
Now if suspension of ineligibility, NH can do stuff. Most likely is sending mom “30 Day Notice”. These are pretty common. (We got 1 at 5 mos cause moms application still processing at end of mo 4 then cleared at 5.5 mo point, so no problem). Basically 30 day says that either they get Medicaid eligible or go private pay or family member signs off on a legally binding financially responsible contract or they move out. 30 day is cc’d to state, DPOA & probono legal clinic. Often NH will do 2 or 3 30 day notices IF resident is current on copay & NH likes resident / family & it’s a normal glitch. The 30 day is an incentive.
But Sis has actual $$$ due as copay. As you wrote Sis has “gifted” herself $ & looks like spent it on vacay & reno. I bet Sissy hasn’t responded to Medicaid or NH. So NH could be proactive & contact APS to look into moms situation to have mom become an emergency ward of the state. Judges do these all the time; at my moms 1st NH lady across hall had this as her son sold moms place & kept $, sale in state database, he was caught out.
She & hubs knows they are caught out. Hubs benefitted from gifting as well.... if he has any type of job w/ clearance or bonded or is military that is a real problem as APS looks into both as they are married. Employers get contacted.
Finding out if 30 Day Notice happened is possible. Sticky to do cause NH is gonna wanna have somebody sign off to pay outstanding bill if family. You - Uncle Kipsy - can go to billing & find out if current on bill but be prepared to get pressured to pay. If you’re not nearby but know old neighbor or family friend who is not easily pressured (like a middle school teacher) to go to visit mom & be nosy, that may be a way to find out. Billing on room & board is not in HIPPA so not a health / medical violation. My moms first NH staff was only too too happy to go on & in detail on the son who sold his moms place.
Really as you delve into this, likely gonna find all sorts of stuff. Unless rent was high & for a long time, I’d be concerned that Sissy has gotten lending on house, which she can’t do if mom on Medicaid. Vacay & reno maybe 40-50k? If she got lending - like HELOC- that will be attached to property. You can go - again - onto courthouse website to search & download filing on lending. Really Uncle Kipsy needs to become one of the Hardy Boys & investigate.
Pls pls let us know what happens, ok?!? Thanks!
inquiring mom (& Sissy as her DPOA & contact person) about, there are I bet property tax issues..... if Sissy has been in hyper overdrive about the house & selling maybe last couple of months, she has likely property tax issues as well that she’s panicking on.
Most counties send out tax bill notice in Oct - early Nov with actual bill sent Dec. AND bill is due in full for end of January. Unless tax assessor has special payment options - like those with homestead exemption can do quarterly payment.
If moms place has had homestead exemption removed cause she’s not living there (state database likely has Medicaid info available for city / county jurisdictions to match up) plus it’s rented. Probably easy search to see if rental, like what cities do now to see if you have AirBnB going on and your not reporting it. If her HE is gone that tax bill can skyrocket.... maybe increase 3x to 5x. Serious $$$.
I have a suggestion for you, go onto tax assessor website to look up the property. You want the info to see just how much of a clusterF Sissy possibly has moms LE house jeapordized at. If you can get old tax bill, it will make this easier as search is usually by PPIN # & not street address. But you can do the search by street address but will take more steps. Look at history for both value & status on property and if taxes paid. If it’s delinquent (horrors!) that info will be there. If delinquent & remains unpaid, most places put it up for tax sale end of summer. It’s like 18-30% interest on delinquencies (more horror!). Whether tax sale matters to me depends on your states laws. For my city, truly acquiring property at tax sale is a waste of time & $, very very hard to do. But state next door, has 3 yr redemption if it stays unpaid and if you hold 1st year tax sale certificate you can file & pay a small fee to get it transferred. Month later it’s titled in your name via tax sale deed.
My point is, if Sissy has serious $ issues, she probably hasn’t paid property taxes as it’s not pressing like a utility bill is. If you find there are issues, call or go to courthouse to clearly find out from assessor staff as to what’s what. Really if you are NOT legally tied to the house or did not sign off anything on her Medicaid application or responsibility at the NH or are DPOA, none of this is your problem. Eventually if not resolved, Medicaid & the NH will be proactive to have something done. Usually it’s that APS is contacted to have elder being made an emergency ward of the state with a state appointed guardian. That guardian has lots of power, like can move mom to another NH if need be & can go after Sissy for any skulduggery done. It will not be pretty.
If you have signed off on stuff, imho you need to get an attorney for yourself & for mom. CELA level of elder law attorney & soon.
So in Moms instance, your sister having "life estate" meant that Mom could live there and upon Moms death the house reverts to the sister. Correct?
But now Mom is in a home and her house is being rented and rent goes towards Moms care. Correct? When u rent, you usually cover the cost of taxes in the rent. So, isn't that cost being deducted from the rent before it goes to the NH?
And I would question if sister is keeping back rent. Because I look at it this way. Medicaid doesn't pay for the full 10k that a LTC gets in private pay. Not sure how thats calulated but after 3 months, Moms Medicaid owed was 6k with her paying $1700 a month. So lets say a Medicaid bed is 5000 a month. Your Mom's SS is 1500 and rent is 500. Medicaid pays the remainder of 3000. Then sister stops sending the 500 rent. Medicaids calculations have been made based on that 500. It doesn't change because sister stops sending 500. There now is a 500 shortage going to the NH every month. How does sister explain that when she updates Medicaid the next year. Why is there now no rent and Medicaids records show Mom is contributing rent from the house to her care?
So if I understand right, the house is Moms till she passes so sister has no right to hold back rent. The house is not yet hers.
Mom may have a balance at the nursing home since Moms rent is part of the equation.
And what about taxes and water bills. Have they been paid?
I think you need some answers before you consider selling Moms house. There will be a title search and any leans will show up. I doubt at this time Mom can sign over the deed to sister because she is on Medicaid. Medicaid won't try to recoup funds until after Moms death. And how does a "life estate" work in this situation?
Another thought, if I am correct about sister not owning the home until Moms death, then the proceeds of the sale go to Moms care. Unless the "Life Estate" legally can read "no longer living in the home or upon death"
Now these are just thoughts since I really don't know all the in and outs of a "life estate"
Mom as long as she’s alive owns the property. So taxes and whatever other benefits of that ownership by mom she can take advantage of. Like homestead exemption or over 65 tax freeze. It stays an exempt asset for Medicaid while she’s alive & gets noted in her Medicaid application & renewal. Upon death, it reverts to an asset of her estate. Whether or not Medicaid MERP factors in LE after death imo depends on your states administration code for Medicaid and it’s laws on property rights, LE and probate. If LE are subject to MERP in your state, you may be worse off with an LE than you would be going traditional probate.
BUT Sissy as eventual beneficiary of the LE has a contingent interest in the property while mom is alive. Usually is called remainderman. It’s an actual set $ amount based on property value and age. IRS has tables on this. If mom decides to sell home while still alive, Sissy has to be paid remainderman from the proceeds of the Act of Sale. Sissy will likely have to sign off on Act of Sale too. Sissy could let the mom have her remainderman $ but doesn’t have to.
SO if sold while mom alive, $ reported for each.
AND for Medicaid, this gets sticky cause as there’s remainderman, mom gets $ which changes her income / assets for Medicaid BUT doesn’t get all the $ as Sissy has her remainderman $. AND you have to have documentation in detail on the split so Medicaid has the exact info. To me, it’s not ever a DIY to figure out even if you kinda can figure out the IRS tables. Best off having a CPA or tax attorney do the work up to determine the exact $ amount in a notarized document.
LE in theory can be all fabulous for “estate planning” if real $$$. That mom has lots of $$$ to pay all property costs now & beyond death. LE all great for & all about moving stuff outside of probate & taxes to heirs. LE likely just 1 part of that moms overall estate planning.
But if you’re eligible for LTC Medicaid, you’re impoverished. There is no “estate” with $. Those estate planning days have long since passed if they even existed. There’s no $ to pay for lawn care much less property taxes. LE waste of paper to do unless there’s $ & no need for Medicaid ever ever anticipated. Personally I think folks who are unsuited to do LE get convinced to do LE by less than stellar professionals.
As an aside on this, as there’s a contingent interest, Sissy could do paperwork to transfer her interest to another. I’m sure if this gets done, there’s a raft of paperwork to make this even more of a PIA.