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My grandmother cannot live in her split foyer. She is selling it and breaking even. She cannot purchase a home on her home so I am going to buy it, place it in an LLC and rent to her. Now, she is going to cosign. Will this affect her (and me somehow) when she applies for medicaid to go to a nursing home?

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It seems to me you are making something that should be straightforward into something complicated. I don't understand why grandma is considering buying a house at all, she would be much better off downsizing to an apartment in a senior focused community.
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Ok, so don't put it in an LLC until further research. Highly appreciate that insight! She doesn't have any money. I'm putting the 20% down to purchase out of my savings cushion. So yes, they will see she sold her house and didn't make a profit. But pulled credit to cosign on the house I'm renting to her. Is that an issue to the original concern, to prevent further need for LTC?
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ThatGuy88, in order for you to obtain a mortgage to purchase Grandmother's house, You mentioned she would need to co-sign, which means she has some money somewhere which would allow the underwriters to accept this loan as a low risk.... like as an example Grandmother putting 20% down which is usually required for investment properties, and to which the interest rates are higher than a regular home buyer.

There will be a paper trail. Medicaid will probably do a credit report and said report will show she had own a house . With more investigation they will see that she sold her house and in turn purchased an investment property, even though she is not on the Deed. That could raise some red flags with Medicaid. It depends on the State and their own rules and regulations. That money might be considered a "gift" to you.

I don't understand the need to go through all the paperwork and jump through all the hoops to become a Limited Liability Corporation in order to purchase said house. And the cost involved.
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Another thought....a business entity holding title to a property probably will have to pay additional charges in title work as well as property insurance, and if your mother is a tenant, someone has to be paying rental insurance.
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Just to clarify, as I'm not sure I made my point well. If I understand your proposal correctly, your mother would co-sign for a mortgage, but not have an interest in the entity holding title to the property. If she does become a member or partner, she will share in the profits of the LLC, which apparently are solely from the rent of the house to be purchased.

I would think the membership would be considered an asset for Medicaid purposes.

Is this right?
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I'm addressing one issue only, that of either creating or transferring title into an LLC. If you're planning to create an LLC to purchase the home, I'm curious why. If you're in business for yourself and have an existing LLC, same question. What's the advantage of an LLC holding title?

If there is an existing LLC, I assume you're the sole partner? I think that kind of defeats the purpose of an LLC vs. a corporation, but I'm still confused why you would use a business entity as a feeholder to charge and accept rent.

I assume you're aware that LLCs are business entities, not personal entities, and are taxed at different rates. The income she pays you will likely be taxable. Better check this out so you don't end up losing money in business income.

The property will be an asset of the LLC, but unless she's a partner or shareholder, I think she might be treated just as a tenant. However, in order to cosign the loan, she most likely would have to hold a fee interest.

I don't think this plan is workable.

LLCs don't have "owners"; they're business arrangements with members which have a purchased and percentage interest. Creating a LLC as well as the partnership agreement is definitely not a DIY project; you would need a corporate or transactional attorney to handle this.

Have you discussed this proposal at all with a corporate attorney? You would be very wise to do so as you're literally playing the corporate fire by creating this kind of arrangement.
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I guess the issue here isn't a concern of divestment of an asset due to the fact there isn't anything liquid after the sale of her house. She has to actually pay a little to get rid of it.

The concern here is will they count the new property as an asset that will prevent her from going on Medicaid and to a long term care facility once the need will arise since she is cosigned on the loan? Even though the LLC will not have her as an owner.
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If the nursing home comes into play soon, this will be an issue. Any divestment of assets can be looked at for up to 5 years previous to the application, I believe (I'm sure someone will correct me if I'm wrong).

Divestment of assets means she may be ineligible for Medicaid until the money from the sale of the house is spent down. Not sure how "breaking even" on the sale of the house will affect that - all I know is that divestment of an asset is a major issue. And the way you're looking at going about it is going to be perceived as an attempt to hide the asset or protect it from Medicaid - they don't like that much, either.

Again, there are others here who are more well-versed in this than I am. I'm sure they'll come along to post their thoughts on it.

What I know is this: if you own any property at all, plan NOW for your old age. Don't wait. Many of us are stuck in this same situation. Our parents did what they thought they had to in order to protect their assets - unfortunately, the laws changed over time, and the protections they put in place are no longer valid.
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Yes a split foyer- we are selling it and buying one level home. She cannot maintain it and planned to pass it to me anyways. (Pre Estate planning also) Since she is breaking even on the home (No equity for a down payment) and her income is low she cannot get a new home on her own. I cannot purchase a second home on my own. So my idea, let me know if I am wrong, is buy it and put it in an LLC, rent it to her, however, she has to cosign on the loan. Not sure when the nursing home issue will rise, but she is declining quickly. $1,800 month income between SS and pension and no other assets.
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When is she going into a nursing home? Any divestment (sale or giving away) of assets during a certain period of time prior to the medicaid application will be looked at and can affect her eligibility.
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I am confused, if your grandmother is unable to live in her split foyer home [I assume due to the stairs] why would she consider renting it back from you? Or is this more of a money issue where she can no longer afford to keep up with the maintenance and expense of the house?

What will be Grandmother co-signing?

I will let others here on the forum reply whether it is a good idea to purchase Grandmother's house. If it is ok, make sure the house is being bought at fair market value and not discounted. Has the house been professionally appraised by a licensed Appraiser? You might need documents to prove you bought at fair market value.
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