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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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If you rent to a related party ie nephew you better make sure that nephew is paying rent that is comparable to non-related party. If less you will have issue of gifting to nephew. The IRS will be looking for a tax return with rental income for your parents which will incur taxes. When renting it is customary to take depreciation against rental income which will muddle up MERP recovery settling out value of house. You lose lock on property taxes in some places since it's not owner occupied any more. Plus difference in insurance for a rental property that will also need nephew to have renters insurance. And if state income tax is assessed it may cause other problems.
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And the legal liability if nephew is injured on rental property. Need for eviction through courts if he quits paying rent or damages property or moves in friends. My sister finally sold moms house that our nephew was renting after he moved out damaging property, not paying rent and housing buddies that paid him but not my sister. Just very tricky
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Thanks for your response Guest. Next question....Renting sounds like a big hassle. If folks are in care, and it's clear they are not coming home ever, should I sell the property and put the money aside until medicaid debt is settled? Or just let the house and acreage be vacant until they have passed away?
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Windy, renting is a big hassle even without the complication of medicaid. My dad rented my grandparents house after they moved to town and the renters just about destroyed it, they also skipped town and left him holding the bag with huge unpaid utility bills.
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.
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Can't answer your second question as to the Medicaid issue.

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.
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If folks are on medicaid and I sell the house, isn't that also a huge problem because now they would have assets that would disqualify the medicaid?
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This post is giving me a headache, it's almost as bad as trying to do my taxes! lol

I'm no expert, I'm just a Canadian who reads a lot. So you would not get medicaid until all the money is spent, but wouldn't medicaid be putting a lien against the property anyway? Isn't it just a case of pay them now or pay them later?
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Windy -

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.
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And Cwillie is correct - if you don't sell it now, the state will come back later and try to take it to pay for the cost of their care. They've already tried it with my parents' home when my father died. The only thing that stops that from happening is selling the house (which means the money essentially goes to pay for their care anyway, so it's the same result), or if a spouse or caregiver has been living in the home for 2 years prior to the deceased's passing. Mom was still living in the house when Dad passed away, so they couldn't touch it.
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Windy Get Thee To An Elder Care Lawyer!,
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?
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OK, just one more thing then I'll quit bothering everybody with this.....

Am I correct that facility care cost is much less under medicaid than private pay? Or to put it another way, medicaid will not pay the outrageous fees charged to families.

I'm not looking for a payday here or trying to game the system to hang onto my crummy little inheritance. But I'm making the trip home soon and want to start the discussion with Mom while she is still able to grasp these issues.

And yes, I shall get mineself to a person of the law posthaste.
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Windyridge, the first thing to discuss with your parents is not their home and acreage. First make sure you have both financial and medical POA, or that someone else has been apPointed . If someone else is already appointed, make sure mom (if competent) is totally happy with them....obviously if that person has not already taken care of asset management, they aren't doing their job efficiently. Nobody should move to asst living without already having considered status of home and acreage. As someone wrote, if you are the POA don't waste time online, get to an NAELA estate planning attorney, who has extensive experience in your state Medicaid. Renting out the home to a nephew has a slim chance of benefitting anyone except the nephew, and a huge chance of looking like an illegal gift when applying for Medicaid. There is a really good book by Gabriel Heiser which you can purchase from his website or find at your public library. Basically the home will have to be used for parents care....the only way anyone could inherit it would be a community spouse not in need of Medicaid, a dependent /disabled child (claimed on your parents tax return as a dependent, this does not extend to grandkids or nephews), or if the child or grandchild lived at the house for over 2 years (someone update this please ) and provided full -time caregiving duties to parents without receiving (?) compensation (?) (I am a bit fuzzy on those details, someone please update those ). Basically it is very rarely a home gets to stay in the family when seniors go on the government dole....this is the way it should be, can you imagine everyone just having the government pay everyone's nursing home bill, and letting billions of dollars of real estate be inherited instead of using those dollars for the bills?
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My thinking was in line with guestshopadmin. It is wise of you to preplan - most states have a 5-year look-back period when determining if/how much support will be available to each parent [i.e., if one needs the SNF and the other doesn't, or perhaps goes into ALF because they can't handle the physical upkeep up of the property]. Please discuss with your parents, to find out what their wishes would be if they had "no choice in the matter, in the future, as none of us know what state we'll be in in the future." Write down their questions, and ... important: while they are of sound mind, make an appointment for a proper trust - whether it's Revocable or partially Irrevocable. i'm not sure if it's the right thing to do [laws change] but some folks put their homes into Quit Claim Deeds ... but that also has complications if the Trust owns the home. One thing is that you certainly don't want to have to spend down the monetary assets of the family home/property, in order to qualify for Medicare assistance. They would be broke [allowed $2,000 in assets, except for a car and a home] .. but what happens to the home after they cease to live, i don't know. It truly is best to talk/meet with an Elder Care Attorney and get the proper documents set up now, while time and their health is on your side. please. Reading through any one of the posts over the past year or so, you'll see how many caregivers are troubled by caregiving expenses, inadequate Trust wording or any retitling of assets not done because ... health changed, and now the principal person can't understand, can't get to the bank, or can't sign the documents. It truly is wise of you to get these aspects of life settled, giving your parents the opportunity to plan their future. i know it's tough ... but it is so very reassuring to get those unsettled thoughts out of the way. It's amazing how much our hands are tied, by the proverbial 'system' to avoid probate, and to take care of our parents. My hat's off to you, and i truly wish i'd had the foresight years ago, but one day at a time, Mom didn't "feel like doing it today."
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I am the only close family left and have a very broad POA which I have been using to handle all financial affairs for sometime. I will consult an attorney during my up coming visit. All the advice will help me stay ahead of issues as my folks decline in coming months/years. Thanks to everyone.
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Wouldn't the monthly income of the rental be applied as income to the couple and thus disqualify them for Medicaid benefits? They review your financial status annually and if their income shows an increase a year after you start renting, it could cause a problem. I agree that I would see an Elder Law attorney who knows Medicaid, before I made any move regarding the house, including renting or sale.
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Definitely a question for a elder law attorney .
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Dear Windyridge, you are so smart to plan ahead! I would highly recommend consulting with a good Elder Care Law Attorney in the state your parents reside in (assuming they will also be in a facility in that state). My father passed away recently so I had to move my mom into a nursing home in another state (50 miles away from their home) to be near my brother. The only asset my parents had was the home that still had a mortgage. While mom was in the nursing home as 'medicaid pending' status, I had to quickly sell the house.

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.
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To add to my post, make sure the Elder Care Attorney SPECIALIZES in medicaid planning not just knows something about it.

Best of luck
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Actually long-term care should be put into your investment portfolio.
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I totally agree with Llamalover, long-term care planning is best done with your financial planner, and they will usually have a great reference for a genuinely good estate lawyer. It is never a good idea to wait until an imminent need arises -- that is not "planning" at all, that is crisis management, never a good idea. If you go shopping for a lawyer in the middle of crisis, any type of crisis, usually you don't end up with one of the better lawyers, you just go with the first available one. And the better lawyers are not usually available on short notice.
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Thank you, Mallory.
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Talk to an elder care attorney before making these kinds of decisions. If you think you have 5 years before they would no longer be able to live in the house perhaps you would want to buy it or have them deed it to you. Then spend down that money for their in home care. Otherwise those monies and/or the home's assets will be lost to Medicaid if they go into a nursing home. We did this for my FIL. The home was in my husband's name. FIL had a life estate interest in the home - that part I wouldn't recommend - and we were able to keep him in his home for about 2 1/2 years longer than we had hoped. We used that money to pay for his in home care. When only a few month's worth of money was left and his dementia was to the point that home care was not able to meet the safety needs, he entered a nursing home. Because he had a life estate in the home we had to pay all of the rent (fair market rent amount) to the nursing home but we still had to pay the taxes and insurance. Toes types of details vary from state to state. But the house was retained and sold when he passed away with the money from the sale of the house going to my husband. If we had handled this in any other way the House or the money from the sale of the house would have gone to the nursing home. Not sure I'm explaining it well but the gist is, liquid assets are difficult to preserve or protect from Medicaid seizure or Nursing Home costs and our goal was to use his assets for his benefit while alive and preserve some assets for the family also.
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It might depend on what state you are in. In Florida, the residence is protected. Medicaid will pay even though there is still a house. You keep the house in the event the person moves back home. My moms elder attorney told me that if I sold the house and the proceeds were used to pay for moms care, I could be sued by sibling beneficiaries who would have inherited the house when mom dies. Meanwhile the house deteriorates and has upkeep costs. I am getting another opinion as I would like to sell it as it is for moms care. For normal families this could be discussed, but there are two sibling beneficiaries who would cause trouble.
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Again, thank all of you so much for the advice. I drove 8 hours today, am in a motel room near Columbus Ohio, and have about 4 hours drive tomorrow to get to the homeland in WV. Now I just have to figure out how to develope all this into a disscusion that Mom will understand and not set off he elder alarm system!
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I know some people strongly believe in their right to have mom's home....but there is also a responsibility for everyone to pay their own way. There is no free lunch. When you "keep " mom's home, you are shifting her costs onto the taxpayers. This is absolutely the truth, and if you proceed to "keep" mom's house you are really just forcing me to pay for mom. It might be a really clever trick whereby you benefit (hundreds of thousands of dollars in most cases) but most people really are appalled at having to pay out for those who HAD assets. Stop for a moment and THINK-- is this a sustainable tactic? Isn't it just kicking the can down the road? Very difficult to justify this tactic on any ethical or moral grounds.
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My brother is an estate attorney in Sacramento.
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Mallory, I thank you for reminding me of that fact and I agree. Funny it is my liberal sister who is so adamant about holding on to it, but I plan to move forward.
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In Minnesota there is no way for two parents who own a home to both live in AL and have medicare pay for it. Also, gifting a home or property has to be done (and over with) 5 years before the Medicaid application is made. Finally, many nursing homes in Minneapolis do not accept Medicaid and relocate residents once the private pay runs out.
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Pardon me, correction "to both live in AL and have MEDICAID pay for it"...so easy to make a slip on those two, and they are so different.
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Yes do consult an elder law attorney. It is not a good policy to leave a house abandoned(Insurance companies frown upon that. They could cancel or increase rates based on libility ) As others have said , renting out the property presents its own particular set of issues! Selling it would seem best, but research a "trust" via attorney.
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