What will happen if my Mom is penalized for the sale of her house within the 5 yr limit?

Mom'sonly - I'm confused, is the property actually sold with the name on the property now in the nieces name (and filed at the courthouse) OR is there an agreement with the niece to own it and niece is paying towards that but mom still owns the home; so mortgage in mom's name???

If its the latter, there will be issues with the mortgage holder as your mom & not the niece is the owner. They don't give a ant's butt what agreement mom has done either as legally they only recognize mom as the mortgage holder.They don't care who has been paying the note either, a Martian could have been paying the mortgage but only mom will be getting the benefit or credit reporting on the payment. Mortgage companies usually require that a new mortgage be done (& qualified for) to have the ownership of the mortgaged property changed - usually the only time this isn't done is if the property is awarded in divorce via a court decree.

About Medicaid, the problem I see with all this again will depend on whether the house was actually sold. If it's still in mom's name, it is her asset. If not and now in nieces name, then the "sale" of the house was not a fair open sale, it was a private sale with your mom doing it owner financed. I bet this was done at less that Fair Market Value and without the standard fees and interest that a mortgage company would have in place, so there would be some degree of gifting or less than FMV done. If niece doesn't make the monthly payment, is mom going to do a foreclosure on her? Probably not. Is mom doing late charges if niece is late? Probably not. Is niece paying for all on the home directly & have all in her name - like property taxes, utilities, insurance? If not, then the house "sale" will be looked at as gifting or as done for Medicaid asset avoidance. These are really sticky to deal with. For everybody's sake, I would suggest you get all the legal on the property along with the documentation on payments on the house along with all expenses paid on the house (whether by you, mom or your niece) since mom & niece started this and go see an elder law attorney so this can be done so that everybody gets credit where due; the mortgage issues dealt with and that it is set up so that any future Medicaid issues can be avoided. Good luck.

If your mother sold her home to your brother 2 yrs ago.Medicaid goes back 5 yrs just what it means. This means your mother needs to stay out of a nurcing home for 3 more yrs in order for this sale to be free and clear.$60,000 is what will be asked to be paid back to Medicaid.

Monica2 - land is usually viewed as an non-exempt asset, so has to be sold with the proceeds going into the kitty for their spend-down.

Now if the land is part of a farm or ranch, then it can get folded into the homesteaded property and become part of the land of the house and then included in the exemption on the house. Where I'm from, ranches are huge and the land several sections and can be an excluded asset as it is part of the house. If the land is a working family farm, it can be excluded too. Famiky farms & ranches have exclusions to MERP - Medicaid Estate recovery - after death too, so you want to make sure you have all this paperworked correctly for the future. Personally, these are sticky to deal with and imho you really want legal to do this for you as there is just too much on the line to do incorrectly. The local Medicaid reviewer is going to kick the application up to a higher level as land / farm / ranches like oil /mineral rights are all high cotton finance and not within their training or purview. So you need to step up too and get your own higher level of expertise with an elder law or estate attorney. Good luck.

What kind of problems could arise from mom selling her home, owner financed? She moved in with me and my husband and her home was just sitting empty with her still making payments on it. She sold it to my niece, owner financed. My niece pays her the monthly payment by bank deposit. Mom then uses the money to make the house payment. What kind of problem could this cause in the future, if she has to go to a NH or if she passes away before it is paid off by my niece?

The caregiver child must live in the parent's house with the parent, for at least the two-year period immediately preceding the parent entering the nursing home. The parent must have needed nursing home-level care and the child must have provided such care that allowed the parent to delay going to the nursing home. If such is the case, then the parent can deed the house to that child without any Medicaid penalties.

So well explained igloo572!!! I would also like to add to this. I was told that I, who had to quick claim the property back in my moms name for her to qualify for medicaid, so it could be sold and money would go to NH, that a family member could buy the property for 20% less the assessed value. No matter what, it all ends up being a big headache!! So I totally agree with trying to keep your sense of humor through it all!! This will, for us who have had to go through all this with a parent, to have our ducks in line when we to that point. I know most of the time things like this happen unexpectedly but it has taught me to think ahead. Igloo572, you had mentioned if family lived in the home for 2 years prior and can document that they provided full time care that prevented the elder from the NH, then they could maybe get the caregiver exemption for property ownership. Does that also go for land, as in acreage, or is it only where the elder has lived? Asking this because I was my moms caregiver for over two years, but she lived with me in my house.

ld - what you will be dealing with is called a "real property transfer penalty". They are very sticky to deal with, if you and your family do not have the funds to private pay the NH for the period of time that penalty would be in effect, I would suggest you consult with an elder law attorney to let them handle the negotiation with your state Medicaid program. Also brother will have tax issues w/60K "gift" too.

Transfer penalty is different than estate recovery which is done through the MERP - Medicaid estate recovery program. MERP is a different legal process done after death in probate via preexisting claims or liens on real property. MERP tends to be done by an outside contractor on state letterhead; they tend to approach it as a debt collection agency in advance of probate.

To figure out what the penalty is, find the tax assessor statement for the year mom gifted it. And again for the current tax year. What a Realtor says it can sell for or what you think it is worth, isn't the figure either. Most courthouses have documents available on-line, so you can get prior years statements easily downloaded for a small fee. Also when you are on the site, pay to download all the legal on the property, like however the "sale" was done & recorded from mom to your brother and then the older legal on the sale of the property to your parents. The older stuff (like anything more than a decade ago), the office will have to research and mail to you. But you will need this and either you do it or the attorney's paralegal will do it for a fee. You just need all the legal on the property/parcel.

Depending on how your state runs the penalty, it could be based on the value of the date of the transfer entered @ the courthouse or the value based on the date of the Medicaid application. Most state have the benchmarks set for the date of the Medicaid application. The daily Medicaid room & board reimbursement rate paid to the NH by your state will be the other benchmark. Like TX pays roughly $ 145.00 a day Medicaid R & B. Which is pitiful low, most east coast states pay $ 300 - 400 a day. So a 60K house in TX means 413 days of private pay penalty.

What is especially problematic for transfer penalties is when they get issued AFTER the elder is admitted to the NH. The NH will not be getting paid by state Medicaid and could get a clawback of payments made. Family will find themselves on the line to private pay for the penalty amount & asap. The amount the NH can bill for future care does NOT have to be at the lower Medicaid rate either - so you need to speak clearly with the billing department of the NH as to what the private pay day rate is and if you are expected to pay that rate OR the Medicaid rate. This could be a huge gulf of a difference too. Understand?

The transfer penalty situation means that although mom is still in the Medicaid program (she is now impoverished so qualifies for being in Medicaid); she is ineligible for Medicaid to pay for her care until the full penalty $$ is paid. The NH cannot kick mom to the curb per se (as Medicaid program has safeguards on that happening) but the NH can do a 30 day notice to mom and to whomever in the family signed on being financially responsible. You have basically 30 days to either come up with the full amount due to that point or sign a contract with the NH as to payment. What I have seen happen at my mom's NH # 1, was with a son who refused to pay any of the transfer penalty on the home he transferred to his name as DPOA for his mom….at month 3 of this, his mom was moved to another facility in a different county as she was made an emergency "ward of the state" and that NH was desperate to fill their beds. Her income was seized by the state and the state appointed guardian was now in charge. He was not told any of this and found out when he went to visit her (she was on the same wing as my mom). This was pretty ugly (the police were there & he was a real a-hole on other issues, I had a dustup with him on a magazine in my mom's room) and I just cannot imagine how awful it was for the mom with dementia. The NH was supposedly going to sue him for the amount owed too. Yeah, this was extreme but apparently he wouldn't deal or just ignored the NH bills so they went hardball. You want to keep communication open with the NH billing department as to how to deal with the penalty.

Often what happens (like what Monica2 said) is that if the property was sold or gifted within the family, then whomever got the property resells or regifts it back to the elder. Then the property goes on the market for sale by a Realtor with the proceeds from the sale going to the state Medicaid program less Realtor commission and any documented fair expenses paid on the house done to make the property sellable. If family is living in the home, they either have to now pay rent or come up with the funds to properly buy the house on the open market. If family lived in the home for 2 years prior and can document that they provided full time care that prevented the elder from the NH, then they could maybe get the caregiver exemption for property ownership…..but because of the issues with gifting it for $ 1.00, this will be viewed as suspect by Medicaid, so you will need lots of paperwork to prove caregiving.

If your brother sold the property to an outside person, there could be a whole bunch of further issues with the property that will have to be dealt with as there will be clouds on the title on the property that will be an issue in the future for whomever bought the property. Like I said, you need an attorney to deal with this as it could get super sticky to deal with properly. Good luck and try to keep a sense of humor in all this too.

Selling a house for $1.00 is still a gift of the full value of the house (less $1.00!). So if your mom applies for Medicaid within five years of such gift, there will be a penalty period of that number of months equal to the value of the house on the date of the gift ($60,000) divided by the state "penalty divisor" (varies from state to state). If the penalty divisor is indeed exactly $5,000, then it would be 12 months penalty period. If she were already on Medicaid when she deeded the house, then Medicaid will immediately disqualify her for 12 months from the date of the gift. You have an affirmative duty to tell the state about the sale.

The gifts TO your mother's bank account will not affect her eligibility unless it causes her to have more than $2,000 at the time she applies. So that is less of a problem.

My brother put my mom on medicaid so he could put her in a nursing home, but the prior two to two and a half years I was solely taking care of her in my home. She had some property which she quick qlaimed to me a year prior to being put in home and she also still had her home which sat empty for the entire time she was with me, other then she still had all of her belongings in it. House was an hour and a half away from me. Could not clean it out because of taking care of mom and also worked graveyard shift, full time. Brother in another state and would not come out to help me. So when mom went back to spend a few months at brothers house to give me some much needed respite time he decided to put her in a home. The property, I had to quick claim back into her name and it had to be put up for sale by a realitor. Also her house had to be put up for sale. After everything is sold the monies goes in an account which the state has control of, along with her small SS check. Once mom passes the state will take out what is owed to them and the remaining balance will go to who ever she wishes.

Since the value of the house is about $60,000, the penalty period would be about 1 years time. In our state the Medicaid payment calculation is a little over $5,000/month. That means that your mom would have a penalty period of one year where they would require private pay.
Was your mother on Medicaid when she gave the house to your brother?
If so, then when your mother dies, Medicaid may or may not require the repayment of the monies. Some states have different limits on the values of the properties that they will go after. You need to seek the advice of an elder law attorney. The other thing that may happen is that Medicaid will seek the fair market value of the property when it was given to your brother. Meaning that your brother will either have to sell the property to pay back Medicaid, or he will be required to take out a loan for the fair market value of the property and repay Medicaid with that money.
When I went into the Medicaid office and told the caseworker that my mother’s home sold for $61K, he told me the penalty period would be 12 months and that would start when she applied for Medicaid.
If your mother applied for Medicaid and is using her own funds to pay for the nursing home and can do that for the first 12 months AFTER applying for Medicaid, you shouldn’t have much to worry about.
There are a lot of details left out in your question.

If she was already on Medicaid, I'm going to guess she did a quit claim deed to your brother. The deed is useless, it only removes her claim to the house and not anyone else's, like mortgage or credit cards or Medicaid. As soon as she dies, the claims begin to roll in. The mortgage gets called. The house gets sold. Medicaid takes their share. Usually there is nothing left.