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?
I would think the membership would be considered an asset for Medicaid purposes.
Is this right?
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.
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in order to protect their assets - unfortunately, the laws changed over time, and the protections they put in place are no longer valid.
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.
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.
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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