Q: I’m looking to buy my mother’s house and wanted to know a few legal questions.
I’m buying my Moms house. She is 85 and wants to live with us but the home is small. She is giving me a deal on the home so that I can borrow more money, which she would receive and then gift me back the money so we could put on a second level. The question is, will Medicaid be able to take the home if she needs to go into a long term care facility?
A: On first blush, without knowing the details, I would advise that you and your mother delay this plan until she has consulted with an Elder Law attorney who has experience with Medicaid (known in Maine as “MaineCare”) applications. The situation you described is fraught with the potential to a) render her ineligible for MaineCare and b) put both of you at risk of losing your home.
The problem with buying your mother’s home for less than fair market value is that when she goes to apply for MaineCare, they will impose a penalty period on her during which she won’t qualify for MaineCare (the length of that penalty period would be based on the difference between the amount you paid for it and the assessed value – the greater the difference, the longer she wouldn’t be eligible; during the penalty period, she would have to figure out some way to pay for her care privately).
The problem with you borrowing money to add an addition is that if you fall behind in payments, you could both lose your home.
If your mother’s intent is to be sure that you get the house even though there is a potential for a MaineCare “Estate Recovery” claim, there are much better, safer, and likely more effective strategies for achieving that goal, but which strategy is the best for your mother’s situation depends on the details. She should sit down with a lawyer with experience in long-term care planning and give him or her all the details.
Another concern I have for you is that, if you decide to go through with this deal without each of you having independent counsel, you (individually) could open yourself up to a claim under Maine’s Improvident Transfer of Title Act. The basic risk is that you could be required to give the house back if you didn’t follow several strict requirements of the act. Therefore, I recommend you each get the advice of different lawyers before you decide what to do.
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