Hello, I'm looking for information that can help us determine how to move forward. My Grandpa is looking to gift the house to my Mom who lives in Minnesota, followed by her immediately gifting it back to me. She'll be going on Medicare in March and will still be on MNsure (health insurance marketplace). She's also looking at going into a facility for long term care there. We're concerned that if we do this the state or government would immediately take the house before it's gifted to me. I've consulted with two different elder law attorneys here in California who say this plan is very common and is easily executed, but the fact that she lives in a different state concerns them. They're unfamiliar with the laws there and how they might differ. For some extra context the reason the house has to be gifted to my mom first before coming to me is to maintain the low property taxes here in California by not skipping a generation (Prop 13).
As far as Medicaid goes, if Grandma receives a substantial gift, such as a house, she is required to use it for her own expenses. She could sell it to you at market value and use the proceeds on herself, but giving it away would invoke a penalty if she applies within 5 years of the gift.
Why can't GP leave the house in his will? Who lives in the house now?
One thing that some people forget with a relative gifting a house to another relative is the Capital Gains Tax when the time comes to sell the house later on.... the Capital Gain tax will be based on how much your Grandpa paid for the house. Also with gifting, the IRS will be looking to see if a Gift Tax will be involved to which Grandpa would need to pay. Usually one parent is allowed to gift a child $14k each year limit.
It is much better if Grandpa had the house in his Will, then the value basis would be the day your Grandpa passes. And no Gift Tax involved.
And if Mom gifts the house to you, chances are the Capital Gains Tax would still be based on the cost of when Grandpa had bought the house, since your Mom didn't purchase the house.
Ekkkk, see how complicated this is, plus the low property taxes if a property goes from one generation to the next.... and with the new Tax Reform generated by Congress recently, things might have changed. I am really surprised the two Elder Law Attorneys weren't able to answer all of your questions. You might want to check with a CPA regarding the Capital Gains taxes and the Gift taxes.