There are a variety of factors that can affect your situation, but in the simplest of terms, Medicaid wants to know that an individual has used all of his or her available assets before using government funds to pay for the care and well-being of a person. Frequently, older individuals may go into assisted living facilities or other long-term care arrangements and have to pay out of pocket for the fees and expenses there.
Once they exhaust their money and assets, Medicaid kicks in to pay the facility for the care of the patient. But Medicaid wants to make sure that the patient has not given away assets that could be used for the care of the patient. For this reason, Medicaid has a five-year lookback rule. Medicaid will see what assets the patient has sold, given away or disposed of during the five previous years. If it finds out that the patient gave away assets, it will attempt to go after those assets for the payment of the patient’s expenses.
In your particular situation, you want to “buy” the home for the value of the mortgage. Now if the home is worth $50,000 and you want to buy it for only $30,000, Medicaid will perceive that as a transfer of the patient’s assets and will want to collect on the amount that should have been paid to the patient.
If the home is worth only $30,000 and you are taking over the mortgage that has a balance of $30,000, you should be fine; but we presume that might not be the case. You need to figure out what the home is worth if you sold it in the marketplace. If you paid your mother that amount, you should be safe; but anything less could pose a problem to you. In fact, you have been staying in the home without paying rent. We’d want to know whether you and your girlfriend pay the expenses for the home.
You might consider buying the home on an installment basis by finding out what the home is worth now, deducting expenses you might have put into the home, and figuring out other expenses that your mom might be saving by having you buy the home. For example, there won’t be a broker’s commission. Once you have a better idea of the costs, the value of the home, the expenses to carry the home, improvements made to the home by you and your girlfriend, and the savings you have by selling the home to your girlfriend, you can come up with a price that might work for all of you and is within the Medicaid rules.
If the value of the home is substantially higher than the mortgage, we’d suggest you talk to an elder care practice attorney in your area. That attorney should specialize in issues like these and will be able to look at your mother’s big picture to advise you on how to proceed and whether the sale of the home at this time would work for all of you.
Ilyce Glink is the creator of an 18-part webinar and e-book series called “The Intentional Investor: How to Be Wildly Successful in Real Estate” as well as the author of many books on real estate. She also hosts the “Real Estate Minute” on her YouTube channel. Samuel J. Tamkin is a Chicago-based real estate attorney. Contact them at ThinkGlink.com.