Can we sell the house to an out of state friend while applying for Medicaid?

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We have just stated the Medicaid application process and Medicaid has told my sister that our mother's house is an exempt asset but if/when she is accepted they will only give her a max of 200 dollars for the house. The mortgage is four times that amount and we cannot afford to cover that extra cost so the house would have to go into foreclosure. I have a out of state friend (does not know my mother personally) who is interested in buying the house as an investment but the sale would be under market value. Can we do this?

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You can do whatever you want but there will be transfer penalty issues for Medicaid probably for both establishing that there was not profit (asset for mom) from the sale and then also for selling it below assessor value.

This is going to be sticky with Medicaid. In the stack of Medicaid application paperwork there is an acknowledgement of MERP. MERP is Medicaid Estate Recovery Program - which is what Medicaid is required to participate in for the state to get Medicaid funds. All states do MERP & how it runs depends on state law for death & probate. If they have a home and go on Medicaid, MERP is required to try to recoup some of the $ spent on their NH from the proceeds of the sale of their home after death (via a claim or lein on the property in probate). You cannot sell their home after death with a clear title until the MERP claim or lein has be released. If it is sold while they are alive, then the proceeds of the sale is an asset for them and they are disqualfied from Medicaid due to the increase of assets. There will be a transfer penalty issued that will have to be worked through to establish there is a zero sum asset gain. As others have said you need to see an elder care attorney and I'd go with one who is certified for elder law speciality in your state.

You can't try to get cute with this. For real property - like home or car - it's all recorded by the local assessors and then dovetailed into the state's system, so there will be a match up & that will trigger a transfer penalty inquiry.

About the selling below value, why? Medicaid will ask this.
If the house is worth less than assessor value, then you can support that by either having an appraisal done (which you may have to do for the sale anyway) or by having a Realtor run comps on the house that show that similar property is selling for less than assessor value. Dealing with a transfer penalty, imho, is all about providing plausible documentation so that they can approve her application. The more detailed the data and the more pages the better.

Would the $$ from sale would have to be enough to cover everything to pay off the mortgage, pay whatever is needed for closing & the settlement statement and then get a release of the deed of trust issued so she can sell it? IF not, do you or other family have the $ to make up the difference to enable the mortgage to be paid so clear title transfer can be done. Probably someone who buys investment property is going to go as cheap as possible and push all the closing costs onto the seller, so you need to be prepared to pay for those costs. You want to really think about all this and it's alot to deal with in addition to moving mom and the issues with that. That's why a good elder attorney can be an invaluable person for you all. Good luck and try to keep yourself organized.
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And Elder Law Attorney was VERY helpful to us and did not cost a lot. If you mom has ANY funds - she should be the one to pay for it - it is a legitimate legal expense for her. As I mentioned earlier - he answered questions we didn't even realize we needed the answers to - WELL WORTH IT and usually not terribly costly. I think it cost us $200 total. He was so kind that we have decided to have him revise our own Family Trust. Hope all works out well for you too.
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How likely is it that you could put it on the market at "market value" and sell it reasonably soon, without investing a lot in upgrading it?

If you really could sell it at so-called market value, then I suppose the difference would be considered a gift to the buyer. For example, if market value is $100,000 and it is sold for $80,000, then $20,000 might be considered a gift.

But that is theoretical. An attorney specializing in Elder Law and very familiar with Medicaid requirements should be consulted.
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I agree seeing an elder attorney is the right thing. As I read the string, I note that as mentioned selling it would only prevent foreclosure. How about the basic homeowners insurance, minimum heating and cooling etc I would ask the attorney if renting is an option
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See a good Elder Law Attorney - first step - he will be able to answer questions you didn't even realize you needed to ask :0) You will be glad you did! Take care and hoping all goes well.
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YES, absolutely see and Elder Law Attorney ASAP. Usually 1st consultation is free.
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I guess I am wondering what happens if we sell and there aren't any profits to go towards her care?
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Since mother had limited assets to pay for her care, we were advised to sell the home and use them to pay for her care. I don't think it matters if sell to an out of state friend as long as the funds are used for her care. You may also want to look into using the funds for an approved Medicade annuity, but go through a lawyer.
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The issue here is there would not be any profits as the offer is below market and would basically cover what is currently owed on the mortgage so there would be no profits to go towards the care of my mother. The sale would only be to keep it from going into foreclosure.
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there is a five year look back for Medicaid. All proceeds from the sale would go to pay for your mom's NH care - it is an exempt asset only as long as she, her spouse or a 'qualified' child or relative (think disability here) lives there. check the threads on Agingcare that deal with this - or do a search on the site about home sale. I know you cannot sell the home and use the assets for anything except her care - the government will insist on getting it back from you. Don't see the point in selling it. Maybe I am wrong here. I am sure there are others who will give you much better information.
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