Understanding all the normal legal disclaimers, what is the general rule for a fair market value purchase of property within the Medicaid look back period?
Basically, a grandmother is about to have to leave her residence and go into a nursing home. In an attempt to shield the property for various reasons (and due to poor prior estate planning), I hit upon the idea of purchasing the property outright (probably by obtaining a mortgage from a bank as opposed to straight cash) at fair market value. This would allow the property to stay within the family while the government could take the new cash position in her estate. My understanding is that the purpose of the look back is to keep people from transferring assets as gifts to avoid counting those assets for the purposes of Medicaid. While I’m not sure of the fair market value (or the current assessed value), it is reasonable to assume it is no more than $50,000.
Understanding the need to talk to a lawyer, have I at least hit upon something worth entertaining as a possibility?
Let me see if I have this straight- you’re only worried about keeping the property itself in the family, not the cash. If you’re going to pay fair market value, the value of her assets hasn’t changed and the look-back won’t be an issue- it’s only an issue for transfers below fair market value . Medicaid doesn’t care if she has property worth 50K or 50K in cash. They only care if she has less in assets after the transfer. You’ll probably need to be careful about documenting that the sale was indeed at fair market value.
Apparently the laws vary from state to state. Is she in New York?
One point is who is going to pay the funeral expenses? If she keeps the house then it will stay in her name until she dies apparently and the funeral expenses would be paid out early from the proceeds of the house sale and Medicaid would be paid last. If she gets the $50,000 now then that will go to pay nursing home bills (and the nursing home will get their higher private pay rate than their lower Medicaid rate) and there will be probably be no money left to pay funeral expenses. And the funeral home will probably come after the family. So she should buy an irrevocable complete prepaid funeral plan out the $50,000.
Obviously this looks very complicated and you need to consult a lawyer.
Keeping the property (and not caring at the moment about the cash) was my intent in the setup and my understanding of the purpose of the look-back. I’m not sure how to determine fair market value in this particular case; I’m assuming a recent re-assessment could be used as a proxy in a market with little activity and a range of property types. As I said, I was mainly asking to see if this is even worth going to a lawyer and a bank with.
This is actually my fiancee’s grandmother in Pennsylvania. I have no idea about funeral expenses other than that there’s at least a plot already purchased. I’m basically trying to put up the Hail Mary to see if we can save her parents from their own bad decisions in the past. I’m hoping for more discussion over the holiday.
It’s definitely worth seeing a lawyer- but see one who specializes in elder law/Medicaid planning. It may be possible to keep some of the proceeds for the grandmother’s use during her lifetime.
You’ll really, **really **want to find a lawyer who specializes in eldercare law in the state Grandma’s in, because Medicaid is administered by the states, and the rules of what can and can’t be done vary between states.
In FL, where we finally had to break down and put my wife’s grandmother in a nursing home a year ago, we haven’t had to sell her house. That may or may not be the case in NY or wherever your Grandma is. Also, FL has a pretty neat workaround allowed if her income’s just a bit too high for Medicaid, where you put the extra income in a trust, and Medicaid basically gets the money from the trust when Grandma dies. But again, state law: the FL courts gave their blessing to this kind of trust, so it’s OK in FL. NY or other states may or may not have anything remotely similar.
It’s quite a thicket, and paying a lawyer a thousand or two to guide you through it is worth every freakin’ penny. The alternative is to burn up a considerable amount of your spare time learning all this stuff yourself. And I say this as someone who used to be a trust-and-estates paralegal in another lifetime, and has absolutely no fear of diving into the legalese when necessary.