Windyridge Asked September 2015
Renting out parents home when they are in care covered by Medicaid. What are the legal/financial pitfalls if any?
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My folks are still in their home but I'm looking ahead. They have funds to pay for facility care for 3 maybe 4 years depending on the many variables. Once they are in a facility I would like to rent the house to a nephew rather than letting it go to rot and ruin. Would this be advisable or more hassle than it's worth in dealing with medicaid issues?
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I don't like the idea of leaving the house empty either. If it were me I would sell, one less worry in settling the estate after they are gone.
But I agree with GSA on the first issue. All good points, especially the issue of depreciation of what becomes a rental property if your nephew moves in.
Another issue is whether your nephew can handle the maintenance and repair, such as if the furnace breaks down in the winter. You might have to identify and select trades to step in and take care of these kinds of issues. Other issues would be whether the nephew would be responsible for lawn upkeep, etc.
You'd have to trust your nephew implicitly; otherwise, anything and anyone could end up living there. Tenants bring in pets, friends, don't keep up the property....
One of the tenants of the cottage my parents owned kitty corner across from their house was responsible for a fire when her son was playing with matches in bed. Another, someone from my father's church, was a deadbeat, didn't pay his rent, and when he left dumped a lot of trash (including a collection of old license plates) in the shrubbery behind the cottage.
Another called me on his way up north to tell me that the furnace had gone out. I had to rush out to get it fixed or shut off the plumbing.
My sister rented out her condo when she bought another house, but she hired a management services, and everything went smoothly.
I'm not conversant enough to answer your second question as posed, but I can offer that allowing the house and acreage to become vacant means that someone (you??) will have to arrange for maintenance of both and you'll need someone on scene or close to ensure that the maintenance actually happens.
In addition, property will deteriorate if it's not lived in and kept up to occupied standards. The heat needs to be kept at least at a minimal level in winter and the A/C needs to be set at a maximum level as well or you'll be dealing with the issue of condensation, moisture, possibly mold and probably some unpleasant smells.
You'd also need someone to check on the inside of the house regularly.
When my parents were Winter Texans, I shut the water off when they left, but still checked regularly to ensure that the heat was still working. And one day, lo and behold, it wasn't.
I waited until about 10 pm, shivering in the cold, for a service to come. But that wasn't the end of it. Dad had had a new furnace installed - I think it was one of those ventless ones and the contractor didn't know how to fix it. So another one was called in, I believe the next day. Another trip after work.
It did get fixed, but I generally checked weekly and the furnace could easily have broken down the day after I checked. Then the house would have been without heat for almost another week.
These houses can be demanding taskmasters.
Yes, selling the house will be an issue for Medicaid. It will disqualify the old folks for Medicaid until the proceeds of the sale are used up paying for their care. No one can be gifted or given any money from the sale of the house for any reason - that is a divestment of assets and Medicaid again will have a problem with that.
I can't say I'd advise renting, either, as others have mentioned, that's a big headache - you have to be sure it's being rented for a fair market amount, not one of those "I'll rent it to family for $1" things - Medicaid will definitely have a problem with that. It'll be looked at as circumvention of their policies.
The only safe move I see for you at this point is to sell it and use the proceeds to continue to pay for the old folks' care. If they have life insurance policies, make sure they are placed in trust with a funeral home to pay for their final expenses - that way Medicaid can't touch those either.
There may be variants on Miller Trust etc to put assets into for their care without blowing Medicaid. Unless house has super great feature or location like igloos Nola neighborhoods, or you think haha money will be left for you (but sibs all gone right?) I would pursue the sale and trust plan. Maybe a long term care option through your state that dovetails with Medicaid?
By consulting with an Elder Care Attorney (I fired one and found another so make sure you get references and check out a few) she gave me the the advice to open a Special Needs Trust in my mom's name. The proceeds from the sale of the home and life insurance death benefit settlement was placed into the trust without effecting her medicaid qualification. The money can be used for things that mom needs such as the $600 fee for a private room outside of what her 'resident liability' covers, computer, electric wheel chair, clothing, etc.). Now, when my mom passes medicaid will recover the remaining money in the fund but that's fine with us.
If your implying that I'm looking for some kind of profit, I strongly resent your inference.
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