My 81 year old mother recently lost her husband. She wants to live with us, but our home isn't suitable, and hers isn't for all of us either. So we want to sell both of our homes and buy one together. Neither of our homes is worth much at all. We have very little equity, but do have other assets to use for downpayment. What is the best way to do this? We would like to both contribute to down payment, and then my husband and I would be responsible for the mortgage (mom's name would not be on the mortgage). Could this cause a problem if she had to go into a nursing home within the 5 year period? Our desire is to avoid this at any costs, and take care of her at home. But I know that may not be possible, and we don't want to be in the position of carrying a mortgage, and then having the state make us sell our home or something like that. None of us has much in the way of assets. It seems Ohio has some of the strictest Medicaid rules. Is a life estate or irrevocable trust a possible option? If not, what would be the best way to protect everyone involved?
We aren't underwater I hope. Just probably can't sell for much more than we owe. Thank goodness we've been aggressive in paying it down or it would be worse.
Here's my thoughts and I am NOT an attorney or paralegal but have been executrix twice and gone through Medicaid app for my mom & MIL:
- you want mom to pay for any & all legal as it solidifies her intent. "If you paid for that dress, you wanted that dress". Say she leaves her tiara to you, you need her to pay for the document that states she left you the tiara. IF you pay for something you benefit from, it poses a problem of undue influence. Comprende?
Now any paperwork for you & hubby only, you pay for.
- SCIN is self canceling installment note. These are sticky but imho really good for having items that would normally go to probate fall outside of probate. Most of the time, SCIN are thought of used by the wealthy as a basic for estate planning, but can work for the rest of us. Say dad 75 has a home which he sells to his son under a SCIN. Now it has to have a validated assessment - which could be less than on tax assessor rolls just as long as done by registered appraiser - then using that figure it is sold for whatever is the lowest interest rate allowed and for whatever is the maximum amount of time based on dad actuarial tables. This has to be done just right so no IRS issues - this is why you need an experienced legal to structure. So junior "buys" the property & pays the low interest - low payment note to dad. Dad dies the next year. Junior now owns the property outright and no debt, nothing to go into Dad's estate. Why? - because the note is self-canceling, it stops on Dad's death with Jr to get the property completely with no more payments due. SCIN are a huge win for families if done right. Especially good for those with a terminal disease but still on the young side or younger side so that the actuarial tables work. If the note is low enough, it combined with their SS may still be under the Medicaid income level too, so Dad could still qualify for Medicaid.
- about the personal care contract, what this would do is provide a way to reduce the income that mom would make over time, so IF she needs to apply for Medicaid say 6 years from now, she is at or close to the 2K asset limit. SHe won't need to do a spend down. Say mom gets 1K a month SS, so at the end of the year mom made 12K but mom is pretty frugal & lives with you, so she only spends 6K. But mom still has 6K in the bank each year. Mom needs a NH 5 years from now, so 6K X 5 years = 30K that is in mom's bank account that she would need to spend 28K asap to qualify for Medicaid. But what if instead, mom pays you now for 12 hours a week of "personal care" and in your area it is pegged at $ 18 hr. So every week mom pays you $ 216 / $ 864 a month, mom makes 1K a month & lives with you so this could make sense. So 5 years from now mom has only 8K to spend down and you have made 51K. As there is a contract that is legal & you & mom have done what you need to (taxes), the $ mom paid you is not subject to a Medicaid transfer penalty. Otherwise you do stuff for mom for free because if mom gives you any money, it will be viewed as "gifting"
- OR you do the same but instead of paying for care, mom pays you "rent". And you deal with rent as required on your taxes. I don't have experience with rentals, but there are a couple on this site (PamS) who do.
But whichever is done (PCA or rent), it provides you with increased income. You know if you needed say 10K to do a downpayment or look better credit wise for the mortgage holder, having mom pay you for this year 2015 would easily give you that nest egg to buy a better suited house for the 3 of you. It's a thought. Then you & hubs make a effort to get your & mom's house market ready this year to place it on the market for next spring. With mom 81 & healthy, this could be a good thing for all as everybody has a goal and a way to participate in that goal. Then once you are in the new house, mom still does her personal care payment to you and now also can pay you rent. For both scenarios, you have to do the amounts that are within your community standards. So if caregivers paid 10 hr then that's what your figure it, ditto for rental. Again a good elder law guy will have these figures based on current data.
You just want mom to have as little to no assets if she needs to apply for Medicaid.
You don't want her having a house if her name if you can help it.
Really at 81 you have time to plan & are smart to be thinking about all this now. My mom went into IL in her mid 90's and now in a NH on hospice on the backside of 90, there was no availability to do any planning as she was flat resistant to moving out of her home (which btw sits there empty, so my future is dealing with MERP), the saving grace for us is that I am a very late in life child (we have a teenager!) still work & can deal with the minutia of all this as we went through reams of paperwork between Hurricane Katrina crap & BP spill - Medicaid is a piece of cake compared to those. You are most fortunate that your mom is wanting to be a part of all this & still young & healthy.
- Transfer penalty is based on the date of the Medicaid application & is by # of days rather than by amount of transfer or date of transfer. Right now, look back is 5 years but I think the federal legislation allows for a 10 year window. You can't be too cautious or careful. Medicaid NH costs are staggering for state budgets and I'd bet that the states are going to be very much more proactive in application review.
Calling Medicaid will be of little use as far as how to proactively protect assets. All this is viewed as legal so they can't say as they are not attorneys. Also their position is 180 degrees opposite to you. You need experienced elder law guys.
Out of curiosity, how underwater are you on your house?
Those are some great suggestions, thank you very much. I won't get SS in any case, since I've been with the state for so long. Mom does get SS & a small pension. My husband plans to work for a number of years. My mom just saw an attorney yesterday to redraw her will (which she may have to redo when we do the house thing), and they didn't really have the expertise to address the questions I gave her to ask regarding Medicaid, etc. I called Medicaid hotline, and they were no help, but they suggested I call the Columbus Ohio Area Agency on Aging, which I did, and spoke with a very nice, helpful man. He sent me a list of elder law attorneys in the area.
So some questions about what you said:
Why does my mom have to be the one to pay for the attorney?
What is SCIN?
Can you have a personal care contract if you don't really need personal care? She is still able to care for herself, she just doesn't want to live alone.
Why would you have a transfer penalty in 6 years if the look back period is 5 years?
You guys are so helpful, thank you so much! I'm so glad I found this site!
Your co-worker with an estimate of $20k sounds way off base unless there was something much more going on, as Igloo stated above, money to be placed in a family foundation where the firm is holding or working the funds.
About the house situation & Medicaid, really as others have said you all (you, hubby & mom) go and see an elder law attorney. You want to do whatever in anticipation that Medicaid will be needed and structure mom's $ to pass review however Ohio does their review. Mom get SS and maybe retirement? whatever the case, mom has the funds to pay for the attorney & it needs to be that she pays for all the legal.
Now you can cut down on costs by putting together a "face-sheet" on all things mom: her marriages, divorces, children, property details, insurance, etc. This will reduce costs. Mom needs to have a properly worded DPOA, MPOA and will or update/codicil to will - those maybe run about $ 1500. Then they will likely suggest options for mom to do: perhaps loan you the $ and do it as a SCIN - which the attorney draws up as it has to be done for actuarial tables; or mom pays you rent; or you provide care to mom as in a personal care contract. If you are retiring in 6 months, doing a personal care contract could be ideal as it builds up your SS and you go from 1 job to another (lol). There's a lot of ways but whatever needs & must be able to pass a review in your state. That is why a good experienced attorney is needed whether it's because your parent has 30K or 300K. You don't want to worry yourself about having a claim or lien placed againsts mom's 50% of the property due to MERP after mom dies, or find yourself in 6 years having a transfer penalty for mom placed by Medicaid and cannot pay the NH to keep her there and so you bring her home and you are now 67 years old……
20K is high, either someone is exaggerating or the family or the firm was wanting to do all sorts of things, like establish trusts or family foundations. Things that require administration which has costs.. This site has a link on the elder law section (upper right), click on it and see the list and contact several as to costs. NAELA level have the most experience. Good luck.