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My mother has dementia and can no longer drive. she still owes taxes on her home.

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Carolina - so the situation ….. is it that mom is in a NH and on Medicaid and at the time she applied for NH Medicaid had a car & her home? But mom also had other debts at the time she went into the NH?

IF this kinda what's what, I'd suggest that before all this gets too deep that you give careful thought as to mom's current & future debt situation & your ability to front all costs that moms assets pose. And you clearly ask her Medicaid caseworker as to what the priority payment is for the income that the sale gives mom for the month the car is sold. Realize that in order to be ok for Medicaid they must start & end the month within whatever income & asset amount are for your states Medicaid program. You need to have a plan as where the car sale $ is going and that it is OK by Medicaid. As guest shop mentioned, all records will surface.

Did anyone explain Medicaid's co-pay requirement? if not…...
Although once on Medicaid, they can keep their home and a car as an exempt asset, it's a problem because they have no $ to pay on any costs of the car & the house. Medicaid requires them to do a co pay (or SOC share of cost) of all their monthly income to the NH less a smallish personal needs allowance (average PNA is $ 50). So if she is going to continue to own car & house, someone in the family must pay all costs on them, and from day 1 of Medicaid till they die and the executor / heirs go through the process of dealing with asset distribution and Medicaid's MERP claims or liens. Mom could live 6 mos or 6 years….so are you prepared to front all costs and issues on the house till whenever? IF the taxes due were property taxes, can you pay them off and pay the taxes coming due for next year (most places have this due January) as well as utilities, insurance, maintenance? A car if paid off can have almost no cost if just stored … but a house has all sorts of costs.

If your mom already is delinquent in taxes, to me, using the car sale $ on past due taxes is just putting a band-aid on a much bigger problem. Think carefully as to if the house makes sense for mom to continue to own.
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You don't have your state listed, so it's impossible to be exact in your situation. But here's some considerations.
Since your profile says that mother is in a nursing home, is she on Medicaid? You will need to have Power of Attorney, financial, that allows you to sell her property on her behalf. You will need to keep records that the vehicle was sold for fair value and not to a relative or friend for $1 if she is on Medicaid. You will need to make sure that the money that is realized from sale is used ONLY for her benefit if she is on Medicaid. You will need to make sure that her income and/or assets don't go above Medicaid limits in that month so she is not disqualified. Medicaid programs require that you provide documentation to re-certify eligibility for Medicaid; and if assets change, you will need to show what was done with the money and that it was spent for the benefit of the person, not someone else living in their house for the benefit of someone other than the person on Medicaid. In this computer age, all records of car, house etc are in the state database and can be checked. If the house is on the market to be sold, you should keep records of expenses against the house to make a claim when the house is sold. Since the home will have a lien on it from Medicaid for expenses after your mother dies, it's important to track these things.
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Why not? What's the holdup?
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