Fort Worth, TX asked in Estate Planning, Tax Law and Real Estate Law for Texas

Q: My dad wants 2 sell me his home below FMV, & continue 2 live with us. Tax implications? Any better options?

We would still be getting a mortgage, just well below Fair Market Value. Would it be better to do something different as in adding me to his deed, or some other legal maneuvering?

2 Lawyer Answers
Terry Lynn Garrett
PREMIUM
Terry Lynn Garrett
Answered
  • Estate Planning Lawyer
  • Austin, TX
  • Licensed in Texas

A: It might be better for him to transfer it to you effective on his death using a transfer on death or a Lady Bird Deed. If he makes any transfer of $200 or more for less than fair market value in the five years before he enters a nursing home (or hospital followed by a nursing home) and then, like 90+% of Texans, applies for Medicaid, Medicaid will treat him as still having the difference between the fair market value and the transfer/sale price. He won't qualify until he has been in the nursing home for a period determined by dividing that difference by Medicaid's low ball estimate of the daily cost. During that period, someone will have to pay the much higher private pay rate at the nursing home.

Please note that in Texas a Medicaid applicant can keep his home and still qualify. Using a transfer on death or Lady Bird Deed, he can transfer it free from Medicaid Estate Recovery.

Your father might want to discuss this with an elder law attorney. He can find a local elder law attorney using the Find a Lawyer function on the website of the National Academy of Elder Law Attorneys (www.naela.org).

Carrie T. Schilling
Carrie T. Schilling
Answered
  • Estate Planning Lawyer
  • Southlake, TX
  • Licensed in Texas

A: Better options are a Transfer on Death Deed (TODD) or a Lady Bird Deed at designate you as the beneficiary. In both of these options, the home would stay in his name until his death at which point it would automatically transfer to you.

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