My husband and I have a home worth 200,000 built on their land, they did not deed us the land for the home. We have been on this 2.5 acreas since 1988, first with a mobile home then in 1990 we started building this home. So the home has been there since then. We pay our own taxes. Please advise us what to do, just in case my parents or one of them need to go into a rest home. My Mom has Dementia. Although I keep her during the day and she goes home during the evening. Can my husband and I purchase the land now without problems in case of medicaid.
You certainly can buy the land, but if you don't pay the full amount valued for Medicaid purposes, your parents would be making a gift that would trigger Medicaid penalties unless an exemption applies. There also could be a tax gift. While the penalty rules vary to some extent by state, there is a good chance that you would have to pay fair market value or assessed value of the land with the home on it since your post seems to indicate that you voluntarily built the home on land owned by your parents and didn't receive any rights as a result of paying to build the home. You should see a local elder law attorney and possibly real estate lawyer as well to determine what price you would have to pay to avoid a gift or the consequences of a gift. It's a shame you didn't have appropriate documents drawn up to protect your investment when you built the home.
Lawrence Friedman, Bridgewater, NJ. Certified as an Elder Law Attorney by the ABA approved National Elder Law Foundation, former Chair NJ State Bar Association Elder and Disabilities Law Section, Member Board of Consultors of NJSBA Real Property, Trusts & Estates Law Section, Vice Chair Special Needs Law Section of National Academy of Elder Law Attorneys, and Master of Laws (L.L.M.) in Taxation from N.Y.U. School of Law. Visit SpecialNeedsNJ.com for articles and Q&A on elder law, special needs, wills, trusts, estates, and tax and SpecialNeedsNJ.com/blog for timely updates. Information on both Avvo and SpecialNeedsNJ.com does not constitute legal advice, as it is general in nature and may not apply to your situation or be subject to important changes. No attorney client relationship exists unless set forth in written engagement terms.
First of all, your biggest issue is going to be with Medicaid. Each state has different Medicaid rules so it's important that you get advice on this matter from a Texas attorney who specializes in Texas Medicaid planning.
Second, if your parents own the land as part of their homestead, then it can be protected through proper legal planning and will not disqualify them from Medicaid. However, if you buy the land from your parents as you mentioned, you will turn that protected asset into a pile of money which is not protected, and they will most likely be forced to spend it on the nursing home before Medicaid will pay. Buying the land from your parents before meeting with an attorney (there are so many issues and variables in the situation you've described, that there's no way you can get sound advice on a forum like this) is probably the riskiest and possibly worst course of action if either of them are facing the possibility of going into a nursing home. My most important recommendation is to seek the advice of an attorney who specializes in Medicaid qualification. It won’t cost you anything to at least find out if there is something that can/should be done.
There are very high penalties if you make a mistake while engaging in self-help planning. We work with clients all the time who tried the self-help rout or relied on the advice of someone who didn't specialize in this area of the law, and then faced losing their assets to Medicaid as a result if they didn’t get the mess cleaned up. It costs a lot more to clean up a mess than it does to do it right in the first place.
The good news is that when someone who has to go into a nursing home has a well spouse, the couple can usually save 100% of their assets and ensure their assets go to their kids someday rather than Medicaid. It will take competent legal planning though.
Feel free to give me a call if you'd like a complementary consultation to discuss the important details of your parent’s situation further.
David G. Voeller
From your parents' perspective, the best time to have sold you the land was 1988. The proceeds of the sale would be well beyond the look-back period for Medicaid. You can still purchase the land, of course; however, the proceeds will be part of the assets that fall under Medicaid's review.
Note also that, assuming both your parents' names are on the deed, both will have to execute a deed to sell the property. Per your facts, your mother almost certainly lacks that capacity.
If your father or someone other than you or your husband has a power of attorney or guardianship to act in her stead, that person could execute the deed.
Your situation suggests that an estate planning attorney be consulted to review the tax and medicaid consequences of a sale now, as well as conveyance issues. It may also be that being left the property in your parents' wills might be beneficial, if that is something your parents wish.
The TX and your county bar associations can give you referrals to qualified counsel.
In addition to all of the issues so aptly discussed by the prior esteemed attorneys, you also have tax issues. First, if you are not on the deed for the real estate you have no right to claim the real estate taxes as a deductible itemized dedcutions. You need to amend your returns for all open years to correct that error and you cannot claim this deduction for 2012 or thereafter until you become title holder. Secondly, if the deed is transferred to you as a gift you get your parent's carryover basis and not a step up in basis. Third, any improvements you made to someone else's property become an issue in determining basis. Get with an estate planning attorney immediately to sort out all these issues.
Hope this helps.
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Mr. Fromm is licensed to practice law throughout the state of PA with offices in Philadelphia and Montgomery Counties. He is authorized to handle IRS matters throughout the United States. His phone number is 215-735-2336, his email address is firstname.lastname@example.org , for more tax, estate and business articles visit his website www.sjfpc.com. and blog
You have two questions, I think. I really recommend you see a lawyer. You don't say which state you are in, but generally, Medicaid will count the property as an asset. There may be some options an elderlaw lawyer can help your parents do some planning with your purchase in mind. It is really too complex and issue to discuss in this forum.
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