We recently placed my grandfather in a nursing home (Kansas). I am close with my grandfather and have a lot of good memories with him and my grandmother (deceased) from spending time with them in their home. I would like to buy my grandfather's home from him. The nursing home said doing so might cause problems with his Medicaid application. The house is in rural Kansas and is not worth a whole lot. The house was recently appraised at $21,000. I believe this is somewhat high for the area. My grandfather wants me to have the house, but my understanding is that he cannot "gift" it to me. I can afford to pay him $10,000 for it. The nursing home said that this might be an issue with his Medicaid application. If I pay my grandfather $10,000 and he signs over the house, will that cause problems?
Additional note: I don't know if it matters, but my father has completed all of the paperwork that allows him to oversee the estate. My grandfather, father, and I are all close. My grandfather has told my father that it is okay to sell the house to me.
I just want to keep the house in the family, but cannot afford the appraised value. Is there a problem if I pay less than the appraised value for the house?
Any thoughts/comments/suggestions will be greatly appreciated. Thank you for your time.
Are you an heir to the property? It may be better if you waited until after your grandfather's death and bought the house. If your grandfather is on Medicaid, they will have a lien on the house, so that what you pay for the house will be used to help reimburse the state.
The NH was wise to warn you of the problems buying the home. If you paid FMV, then the money would need to be spent down before Medicaid would help. If you paid less than FMV, the money would have to be spent down, and the difference between the FMV and what you paid could be seen as a gift that could be penalized. Your grandfather could not qualify for Medicaid help until he personally covered the amount of the penalty.
Unless it is pressing to buy the house now, I would either pay FMV or wait.
Please keep in mind that Medicaid can do a 5 year look back on all financials and is required to review that the applicant is impoverished without any inappropriate transfer of assets for Medicaid to pay. When he applied for Medicaid, he was required to list all his assets, including his home. Medicaid & the NH know there is a home. You have been warned by the NH that a sale will be a Medicaid problem
By applying for Medicaid, grandpa allows the state to have an all access pass to his information. Keep in mind that all real property (home,land, autos) are in the local tax assessor database; & in turn all this info is dovetailed into the state database. Property sale or transfer and the amount will show up eventually.
How transfer penalty works is a formula based on your state's Medicaid reimbursement rate. Say grandpa is in TX; TX daily rate is $ 145.00; so a 21K tax assessor statement property sold for 10K means an 11K penalty. It was appraised recently so no wiggle room on that! So for almost 76 days, grandpa will have to private pay for his stay @ the NH. Although he qualifies for Medicaid, he is ineligible for Medicaid payment till the transfer penalty days are over. Here is where it gets' sticky with the NH - and is why they have warned you that doing the transfer or gift will cause problems - if he is ruled ineligible the NH will have their payment either suspended or clawed-back. The NH will do whatever to get paid for their services. NH could bill you or your dad. There is probably a statement in the admissions contract that allow for them to bill family for all services if grandpa is ineligible for Medicaid due to penalty and turn it over to debt collection if not paid. Please review the paperwork.
If your state is one which allows for Medicaid to lien property, it could already be placed. Now Medicaid lien is not like a mortgage or workman's lien which show up as they are filed @ courthouse. If grandpa were to "sell" the property to you via a Quit Claim Deed, you likely just take the QCD to the courthouse & file it. But a QCD does not provide for a guarantee of ownership. QCD implies what they think they own; it's a Warranty Deed that guarantee's ownership. So later if you sell the property or take out loan and use the property as collateral, you will need to provide clear title to the property to do these things. When the title company does the search, the Medicaid lien will come up. No title issued till lien is gone.
As Jessie said, WAIT. Grandpa's house - if it was his homestead - is an exempt asset for Medicaid by & large for the rest of his lifetime. He can keep the property, he does NOT have to sell it to qualify for Medicaid. BUT he will not have any of this monthly income to pay for anything on the house. All his income (less his personal allowance of $35 - 90) must be paid to the NH as his "share of cost". So someone else in the family will have to pay taxes, insurance, maintenance, etc on the house and for the rest of his lifetime. If you can afford to do this for the empty house, then when he dies you will file an exemption for those expenses with your states MERP (Medicaid Estate Recovery Program). MERP is required to do a cost benefit analysis before it goes after a property. A 21K value property with exemptions may just be too low of a value to be worth going after by MERP. If so, then in probate you transfer the house to your ownership as per his will. But if you chose this route, you kinda have to be able to pay for whatever for the empty house for possibly years & then knowing that MERP is a possibility.
But …what about placing it on the market with a Realtor for their 6 month listing & at the recent appraised value. Then if it doesn't sell, then perhaps do the auction. It just shows due diligence & financial responsibility on the part of the DPOA (your dad I assume). Now putting it on the market will have costs - like yard, utilities on, inspection or other fees that the buyer expects the seller to pay. All these costs - which I assume you or your dad will pa - need to be documented so that you all can be reimbursed from the proceeds at the act of sale.
In my mom's state (TX) if they are a widow or widower & have a home and place it on the market, they can request a diversion of their required SOC income to pay for house related expenses while on market. Medicaid does NOT have to grant this either. House has to be sold by a Realtor, MLS listing, etc, absolutely no for sale by owner stuff. House has to be empty too, so if kids living at the home there can be no diversion of their required SOC to the NH.
BUT please whatever you do, you REALLY need to find out if Medicaid has or can have a claim or lien on the property. What is happening more & more is that states are now having to enforce & do something about the required MERP aspect of Medicaid program. Many states are out-sourcing this & contractor makes a % of the recovery plus fees. MERP recovery rate are up. Because of this, many title companies are now requiring for property sold by those over 65 to have the property owner or their executor or DPOA to sign off on whether or not Medicaid was obtained by the property owner as MERP could be a factor and then require an indemnity agreement / insurance before title will be issued if seller cannot provide a MERP release from the state. And yes there is a fee for buying what is essentially an insurance policy. The auction house like a Realtor won't be liable if later on the MERP claim or lien is a big problem for buyer, the problem will be for whomever sold the property or their heirs as the buyer can take you (DPOA) to court for non-disclosure & damages. Then the indemnity pays for this problem.
21K that is pretty low, where is this, way out rural, or bad Detroit??? If you could tell us about the property…like is there a mortgage & if so who holds the mortgage (like bank or if it's FannieMae or other federal loan); who did the appraisal and why was it done; is there anything in the appraisal that could be a problem (like anything not up to code); what is current tax assessor statement..etc. Also can you figure out just what the "nut" is on the place. Go through all of grandpa's stuff from the last couple of years and tally up his insurance, taxes, utilities, etc to see just how much it really will cost to keep the house annually. Could this be manageable for your dad to pay for all for grandpa's life expectancy? Then you all file an exemption to MERP for the house expenses & and also file it as a debt on grandpa's estate for probate. Say he dies 3 years from now and you all do nothing but the minimal on the house. House value is 3 yrs later 17K by tax assessor, you all have 8K in documented expenses, so at the very most MERP's claim could be 9K. MERP won't do it as cost benefit analysis shows not worth it. But you need to get MERP release from state so no future title issues and file @ courthouse.
ANother thought, you sound young, & if you are and don't make much money because you are still in school or whatever, you may meet the MERP exemption for income if you are a heir on the property. This is one of the exemptions on my mom's state MERP website (TX). MERP has all sorts of exemptions and exclusions as to whether it is done - like if there is a still in the community spouse, that is a MERP exemption. But there also are exemptions for those who are low-income and heir. If you are a student or just starting out and have family you might meet that low income qualification. So if you still meet the exemption when grandpa dies, you file for that exemption from MERP as an heir to the estate as per grandpa's will. MERP releases their claim or lien and you get the property and state Medicaid paid for grandpa's care 100%. Take the time to read & re-read how the MERP program is done for your state, it's important. Good luck!
After I posted my question, I thought of another issue that you may or may not be able to comment on. At one point, there was discussion of the house being auctioned off. If it goes to auction before, or even after, he passes, does the sale price have to be fair market value? If it is auctioned off before he passes and only sells for $15,000 will that delay Medicaid reimbursement? Does the $15,000 become fair market value even though it was appraised at $21,000?
If it goes to auction after he passes, and say it goes for $15,000 (still below appraised value), does Medicaid try to get payment some other way?
As much as I would like to keep the home in the family, I am more concerned that my father and mother may end up having to pay a lot out of their pocket.
As before, any thoughts/suggestions/comments will be greatly appreciated.
And again, THANK YOU, THANK YOU, THANK YOU for your initial posts.