How can my MIL use her money to create an ADU on my property for her use without affecting a look back period?

Pazzy, I recommend having a meeting with a certified elder law attorney that does medicaid. They will guide you in what you can do and how to do it.

If you are in Tucson I can give you the name of a CELA. If not, go to www.nelf.org and you can find one near you. Arizona has lots of attorneys that claim elder law but, not really elder law attorneys, estate would be a closer description. Just a heads up from my experience.

This is a really tricky question, because you are making guesses about what may happen in the next 20 years for several lives. Here are a few scenarios that might help:

Your mother pays for the building work (assuming it’s permitted), but wants care within 5 years and Medicaid look-back treats it as a gift. BUT if M doesn’t pay, the money is still in her bank account and it is counted by Medicaid, just as the gift would be counted. Would that have been any better?

M pays, and her health and your relationship stays good for 10 years. But after 80, to stay in the building M needs more care than you can easily provide or than she can pay for. And the building needs more steps (which is typical). M now resents the ‘gift’ she made for the building work. That money would give her more options now. In her mind, it was for permanent care. In your mind, ‘permanent’ was never even considered. Looking back after 10 years on that scenario, what do you think would have worked out better?

Perhaps you pay for the building work now, taking out a loan for it if necessary, then charge rent for occupancy and a care charge for what you do? Even back rent for the space in the house, which has been provided free up to now? It all makes the loan more workable. Even talking about that is quite stressful. It’s so different from how things have been done up to now.

Because the current arrangement has to change, you opt for Independent Living or Assisted Living. Both are much more expensive and not as good as the way things are now. Even after 10 years, M doesn’t really need them. Looking back, what would have been better?

Without a magic mirror, there are no guaranteed answers here!

If you want her near you use her money for an ADU that can be moved or sold. You can avoid increase property taxes in many states for it as long as she actually moves in.

My sister lives with my nephew the past 10 years .She had inherited some money 5 years ago , not a great deal but nagged her son to move to a ranch home until he gave in , she gave him most of her inheritance money to make that possible . Well they moved in Dec 2020 when she was 65, thinking she would be healthy for years to come. She has Parkinson’s like symptoms the last two years although they say it’s not Parkinson’s and has dementia . She can not afford assisted living . Her son ( my nephew ) is stressed out dealing with her stubborn behaviors . For now she has been taking care of her own dressing / hygiene and walks with a walker. He worries if/when she needs SNF if that happens before the 5 years is up .
I say don’t do it .

It not only will LOOK like a gift but it will BE a gift in the mind of the federal and state government. Look at it this way. You will have a renovated garage and the taxpayer will pay for it.

I don't think you should do this. You are just beginning to know what all caregivers come to know, things will get a good deal worse. Soon you will be 24/7 hated caregiver unable to do a job. Think about it.

Let your Mom stay as long as you like, but do not take her money other than on a care contract you do with an attorney that stipulates how much monthly your mother will pay for her transportation, food, shared living costs on mortgage (and mortgage loans you may choose to take out to build this addition), and how much paid for anything other you do. Also stipulate how often you, hubby and mother (and any younger children in the household) will assess if this in home situation is working FOR ALL INVOLVED. When it is not working for ONE then it is out and mother goes into care. She will need her finances for decent care, not be put in a Medicaid financed nursing home while you enjoy your new addition.

See an attorney, also , for any questions of this sort because if you do it wrong it is awful and often cannot be fixed. A forum of caregivers may give advice that is wrong, irrelevant for your state and etc.

Sure wish you the best of luck. I think there are a lot of decisions in your future.

YOU will become her caregiver. That will take time away from your family, and it’s almost certain that you will regret this plan.

Please read posts from others here who got hooked into similar miserable situations. They all thought it would work. It rarely does.

There are so many lovely independent and assisted living places where MIL can have activities and friends her own age. Visit some.

Medicaid has a 5 year lookback period. Something like this would be considered a gift because u profit if the property is sold. If you feel that Mom will not need care in the next 5 years, you should be OK. I hope you all realize renovating will not be cheap. Does the garage already have electric and water lines? Materials and labor are very expensive. Have you spoken to ur Township to see if this would be allowed. My Township only allows this for properties grandfathered in. New construction for something like this is not allowed. I have heard that communities are opening up to things like this because of shortage of care facilities and the ability to pay. Some Babyboomers will be turning 80 in 2026.

You don't say how old your MIL is. Please understand that if she lives adjacent to you, you will (by default) \ eventually become her full-time caregiver as she declines. Unless she dies suddenly and early from a medical event or sickness, you will slowly become her caregiver for an undetermined amount of time. And you won't be able to transition her into a facility because her money will be tied up in the ADU, which you won't be able to sell, and may not be able to buy her out of.

I would not even entertain a plan like this, but if you do -- go into it with your eyes wide open. There very minimum stipulation would be that she assigns one of you as her PoA and also Pre-need Guardian, and agrees to annual cognitive testing (for free through Medicare, annually).

You can consult with a Medicaid Planner for AZ to get better and more current/accurate info than from an anonymous global forum where there's no accountability.

Bad idea, use her savings to get her into Low income housing in your area.

She is healthy and does not need to live with you and your family, worrying about "What If's" is a a total waste of time.

When she can no longer be on her own you can address the issue at that time.