In-Laws are estate/Medicaid planning - need help

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Maven
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In-Laws are estate/Medicaid planning - need help

Post by Maven » Tue Jul 09, 2019 2:13 pm

My In Laws are both 67 years old and in good health. They live in a home/farm land that has been in the family for three generations. The home and land are VERY important to my father-in-law. He would like one of his two children to take it over when they pass away but neither wants to live there and both live far out of state. When the time comes, my husband prefers it to be sold while his sibling wants to keep it for history's sake, but he would not move across the country to live there. It would have to be rented. It is NOT a low maintenance property. Neither adult child has been a landlord nor seems to desire to be one. My FIL seemed very satisfied to have one child say he didn't want to sell it - and not at all concerned with the fact that the other son said sell.

After assisting a low-income relative transition into a nursing home, they are now very concerned with the Medicaid look-back period and are trying to get things arranged to allow time for the 5 year look back. They say the home is paid off, they have no debt and have SS and a pension. I'm not sure of their savings. They say they have enough to live comfortably on a budget, but not extravagantly. There is no talk of desiring to leave behind an inheritance, with the exception of the home/land were it not to be sold.

They are chatting about putting their home in the name of their sons for the sake of this Medicaid planning. I sense some serious paranoia over this matter. My question to them was... "If you have $400k in the value of the home and land and neither child wants to carry on the tradition of living on this property, are you really going to live in a Medicaid facility if you can use the $400k to further a more ideal living environment and/or fund your retirement?"

Am I missing something? Also, the child who wants to keep the home has a history of making poor financial decisions and lives paycheck-to-paycheck with two young children. What implications could the in laws face if his name were to be on the title of the home and he were to face a bankruptcy, divorce, etc? What about my husband being the co-owner? Tax implications, etc? It's doubtful they will spend $5k+ to hire an attorney to advise them so I would greatly appreciate feedback from the community. Thank you!

Beehave
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Re: In Laws are estate/Medicaid planning - need help

Post by Beehave » Tue Jul 09, 2019 9:17 pm

I agree with the OP that the asset should be used to fund the future needs of the in-laws. Your assets should be used to improve your well-being and should not become ends-in-themselves.

Perhaps the husband of the OP should say to his parents that if he has control of the assets he will use the assets (less taxes and expenses) to fund their needs, so it will simply make more sense for them to plan to just use the assets in that way themselves. Of course, it would be best if the other son would commit to this as well, although this does not sound likely from the info provided.

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Nate79
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Re: In Laws are estate/Medicaid planning - need help

Post by Nate79 » Wed Jul 10, 2019 6:08 am

They need to hire an estate attorney to do proper planning instead of their misguided planning.

NotWhoYouThink
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Re: In Laws are estate/Medicaid planning - need help

Post by NotWhoYouThink » Wed Jul 10, 2019 6:57 am

It would be possible for them to give the house/land to their sons and retain a life estate, but they'd need to go through lawyers to do that, and then your husband would eventually be stuck owning a house with his brother, which he probably doesn't want. It would be better for them to keep the house and use it to pay for their future needs, but it's hard to force someone to do what you want them to do.

student
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Re: In Laws are estate/Medicaid planning - need help

Post by student » Wed Jul 10, 2019 6:58 am

Nate79 wrote:
Wed Jul 10, 2019 6:08 am
They need to hire an estate attorney to do proper planning instead of their misguided planning.
+1. This is not something that a mistake can easily be fixed.
Last edited by student on Wed Jul 10, 2019 6:59 am, edited 1 time in total.

clip651
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Re: In Laws are estate/Medicaid planning - need help

Post by clip651 » Wed Jul 10, 2019 6:58 am

Also, look into income limits for Medicaid in their state. You mentioned social security and pensions. Look at their joint income, as well as projected income for the survivor once either one passes. It's possible they would be disqualified on income alone, so it may be a moot point.

best wishes,
cj

smackboy1
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Re: In Laws are estate/Medicaid planning - need help

Post by smackboy1 » Wed Jul 10, 2019 7:33 am

Maven wrote:
Tue Jul 09, 2019 2:13 pm
They live in a home/farm land that has been in the family for three generations. The home and land are VERY important to my father-in-law. He would like one of his two children to take it over when they pass away but neither wants to live there and both live far out of state. When the time comes, my husband prefers it to be sold while his sibling wants to keep it for history's sake, but he would not move across the country to live there. . .

It is NOT a low maintenance property. Neither adult child has been a landlord nor seems to desire to be one. My FIL seemed very satisfied to have one child say he didn't want to sell it - and not at all concerned with the fact that the other son said sell. . .

After assisting a low-income relative transition into a nursing home, they are now very concerned with the Medicaid look-back period and are trying to get things arranged to allow time for the 5 year look back. They say the home is paid off, they have no debt and have SS and a pension. I'm not sure of their savings. They say they have enough to live comfortably on a budget, but not extravagantly. There is no talk of desiring to leave behind an inheritance, with the exception of the home/land were it not to be sold.

They are chatting about putting their home in the name of their sons for the sake of this Medicaid planning. . . My question to them was... "If you have $400k in the value of the home and land and neither child wants to carry on the tradition of living on this property, are you really going to live in a Medicaid facility if you can use the $400k to further a more ideal living environment and/or fund your retirement?" . . .

the child who wants to keep the home has a history of making poor financial decisions and lives paycheck-to-paycheck with two young children. What implications could the in laws face if his name were to be on the title of the home and he were to face a bankruptcy, divorce, etc? What about my husband being the co-owner? Tax implications, etc? . . .

It's doubtful they will spend $5k+ to hire an attorney to advise them so I would greatly appreciate feedback from the community. Thank you!
These facts are a slow motion train wreck - it's impossible for all the parties to get 100% what they each want. Everybody needs to prioritize what is important to them. Then they need to seek the advice of a local elder law attorney experienced with dealing with similar assets and similar situations and come up with a plan.
Disclaimer: nothing written here should be taken as legal advice, but I did stay at a Holiday Inn Express last night.

BarbBrooklyn
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Re: In Laws are estate/Medicaid planning - need help

Post by BarbBrooklyn » Wed Jul 10, 2019 8:46 am

They need to hire a LOCAL certified Medicaid savvy Eldercare attorney.

I know I'm preaching to the choir here. Go to Agingcare.com if you want some cautionary tales about how awful this can get.

Your husband needs to be very straight and clear with them about what he isnt willing to do. If you say " not, not really" some parents hear " maybe". A mediator can also be useful in a situation line this.

You can also point out to them that right now, they have the luxury of making these decisions for themselves. Down the road, the State may step in and decide where they live (okay, that might be a stretch, but can get obstinate folks to make plans).
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not4me
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Re: In Laws are estate/Medicaid planning - need help

Post by not4me » Wed Jul 10, 2019 10:07 am

I agree with much of what has already been posted; sadly, this isn’t a unique situation. Having seen others make similar decisions, I can say that it isn’t always decided based on finances. I’ll throw out some considerations, but there’s really too much to untangle & too little info.

To a degree, this depends on the state the property is in. As pointed out above, they may not qualify for Medicaid anyway. While the feds set guidelines, each state has wrinkles. Look back periods differ, is it community property state, etc.

How would the property be “transferred”? Sounds like a gift. Which means there won’t be a step-up in basis – although the FIL may feel that to be a disincentive to ever selling it. It may be obvious, but the property is owned by those whose names appear on the deed. Are both parents removed from the deed? Rules out possible reverse mortgage later. If not, the parents still have a chance for their share to be included in Medicaid lookback. Some states give a break on taxes for older landowners which might be affected. If both kids names are on the deed, they’ll be jointly responsible for property tax, any decisions….It is an asset that is exposed to their situation should an accident occur leading to disability, bankruptcy, or worst case death before parents death.

You mentioned detecting paranoia; it sounds like denial may also be in play? If property is not low maint, how do they plan to maintain it? If one dies? That is, they may have difficult decisions ahead apart from this that they don’t want to address.

There may be other options that they might consider, but really need a qualified lawyer assisting them. Is it possible to use some form of trust? It doesn’t sound likely, but could property be partitioned in such a way that the house & some land be kept, while some sold off?

Good luck…wish there was a good answer.

delamer
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Re: In Laws are estate/Medicaid planning - need help

Post by delamer » Wed Jul 10, 2019 10:29 am

I am not a lawyer, but it is my understanding that once the sons go on the deed then they could be sued if there is an accident on the property. And also, if one of the sons is sued then the property could be attached as part of the suit.

Plus if the sons inherit the property when the parents die, the sons likely will receive a step-up in the cost basis of the property. This will reduce their taxes if they eventually sell, compared to being put on the deed now and receiving the parents’ cost basis.

Again, I’m not a lawyer but these issues need to be understood before any decision is made.

Good luck.

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Steelersfan
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Re: In Laws are estate/Medicaid planning - need help

Post by Steelersfan » Wed Jul 10, 2019 10:35 am

Have they investigated what kinds of facilities in their area accept Medicaid patients even if they qualify? There may be some goods ones, but there may not be. I wouldn't want to be stuck living my final years in a facility that was substandard.

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Maven
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Re: In Laws are estate/Medicaid planning - need help

Post by Maven » Wed Jul 10, 2019 12:36 pm

Thank you for all the replies. Some legal issues were brought up here that I haven't considered so I greatly appreciate it. I think excellent advice is to sit down with the in laws and have them PRIORITIZE what is important to them. While my FIL feels like the house/land is most important, I think knowing that his wife will be cared for is really his priority if he were to pass first. As always, I appreciate the help!

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dm200
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Re: In Laws are estate/Medicaid planning - need help

Post by dm200 » Wed Jul 10, 2019 12:49 pm

While keeping the farm/land in the family may be important for him - it may be very, very impractical for the heirs.

Suggest advocating for "flexibility" of plans - so that he is satisfied that the land can be kept in the family, BUT easily allows other actions after he dies.

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dm200
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Re: In Laws are estate/Medicaid planning - need help

Post by dm200 » Wed Jul 10, 2019 12:50 pm

Nate79 wrote:
Wed Jul 10, 2019 6:08 am
They need to hire an estate attorney to do proper planning instead of their misguided planning.
Yes

Nowizard
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Re: In Laws are estate/Medicaid planning - need help

Post by Nowizard » Wed Jul 10, 2019 3:33 pm

Guarding income is prudent, but Medicaid eligibility requires that a person have assets of no more than about $3,000, I believe. Getting rid of the farm in one way or another is a starting point if this misguided consideration is something they feel they must do. The issues are more than financial and have to do with personal psychology, traditions that are ending, history, etc.

Tim

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Maven
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Re: In Laws are estate/Medicaid planning - need help

Post by Maven » Wed Jul 10, 2019 6:58 pm

Question... if my FIL's main goal is to ensure the farm is passed down within the family (assuming a family member did indeed want the property), is he correct in thinking ahead to shelter it from a Medicaid spend-down in the event they need long-term care down the road?

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Re: In-Laws are estate/Medicaid planning - need help

Post by LadyGeek » Wed Jul 10, 2019 7:18 pm

This thread is now in the Personal Finance (Not Investing) forum (Medicaid planning). I also fixed the spelling in the thread title "In Laws" to "In-Laws".
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Re: In Laws are estate/Medicaid planning - need help

Post by clip651 » Wed Jul 10, 2019 7:23 pm

Maven wrote:
Wed Jul 10, 2019 6:58 pm
Question... if my FIL's main goal is to ensure the farm is passed down within the family (assuming a family member did indeed want the property), is he correct in thinking ahead to shelter it from a Medicaid spend-down in the event they need long-term care down the road?
Did you look up their state's Medicaid requirements? Do you know their income? If they have decent income, they may never qualify for Medicaid, anyway.

If you or FIL can't figure it out, he will need local legal advice to answer that. No one here even knows what state the property is in.

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Re: In-Laws are estate/Medicaid planning - need help

Post by BarbBrooklyn » Wed Jul 10, 2019 9:01 pm

In some states, there are different Medicaid rules for family farms, as opposed to other sorts of property.

This is NOT a DIY project.
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Re: In Laws are estate/Medicaid planning - need help

Post by Carefreeap » Thu Jul 11, 2019 9:49 am

Maven wrote:
Wed Jul 10, 2019 6:58 pm
Question... if my FIL's main goal is to ensure the farm is passed down within the family (assuming a family member did indeed want the property), is he correct in thinking ahead to shelter it from a Medicaid spend-down in the event they need long-term care down the road?
As been said before your in-laws need to spend time with an elder care specialist for their State. I did some research for my dad who is a current Medicaid recipient (California) and this is what I found:

Look back is 5 years
No assets above $2k
Income can't exceed $1250/mth
Medicaid DOES NOT pay for assisted living, it will pay for rehab and skilled nursing care. The skilled nursing facilities typically have 3 people to a room (maybe 200 sq.ft.).

My takeaway is that if you have assets you want to use them rather than be dependent on the State.
YMMV.

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Re: In-Laws are estate/Medicaid planning - need help

Post by bsteiner » Thu Jul 11, 2019 11:31 am

As several people have pointed out, Medicaid varies from state to state, so they would have to consult with a Medicaid lawyer in their state.

However, they should first make sure this is what they want, and whether they're willing to give up flexibility and control at a relatively young age in exchange for possibly getting Medicaid in what could be the distant future.

NotWhoYouThink
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Re: In-Laws are estate/Medicaid planning - need help

Post by NotWhoYouThink » Thu Jul 11, 2019 1:32 pm

Come up with some plausible scenarios where they are too weak to take care of their home, but not sick enough for Medicaid. What would they do? Assure them that you will not move in with them, and they will not move in with you. If the money is gone and they have given away the house, where do they turn?

Likely they will bury their heads in the sand and refuse to engage in this discussion, or to consult with an attorney. I'm not sure there is anything you can do about that except fret. And don't sign anything.

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Re: In Laws are estate/Medicaid planning - need help

Post by Stinky » Thu Jul 11, 2019 2:58 pm

Carefreeap wrote:
Thu Jul 11, 2019 9:49 am
Maven wrote:
Wed Jul 10, 2019 6:58 pm
Question... if my FIL's main goal is to ensure the farm is passed down within the family (assuming a family member did indeed want the property), is he correct in thinking ahead to shelter it from a Medicaid spend-down in the event they need long-term care down the road?
As been said before your in-laws need to spend time with an elder care specialist for their State. I did some research for my dad who is a current Medicaid recipient (California) and this is what I found:

Look back is 5 years
No assets above $2k
Income can't exceed $1250/mth
Medicaid DOES NOT pay for assisted living, it will pay for rehab and skilled nursing care. The skilled nursing facilities typically have 3 people to a room (maybe 200 sq.ft.).

My takeaway is that if you have assets you want to use them rather than be dependent on the State.
YMMV.
+1

This is such a bizarre situation. You have a FIL who desperately wants to pass along a property to his heirs who really don't want it. Also, the FIL is willing to subject himself and his wife to Medicaid nursing homes rather than private pay, just to be able to pass along the property (to those who don't want it).

As suggested above, there are at least two things to do:
1. Get proper, local, legal advice.
2. Tour some nursing homes, both private pay and Medicaid. If your area is like mine, you will see a world of difference between the two types of homes.
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Maven
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Re: In Laws are estate/Medicaid planning - need help

Post by Maven » Thu Jul 11, 2019 3:19 pm

Stinky wrote:
Thu Jul 11, 2019 2:58 pm

This is such a bizarre situation. You have a FIL who desperately wants to pass along a property to his heirs who really don't want it. Also, the FIL is willing to subject himself and his wife to Medicaid nursing homes rather than private pay, just to be able to pass along the property (to those who don't want it).

As suggested above, there are at least two things to do:
1. Get proper, local, legal advice.
2. Tour some nursing homes, both private pay and Medicaid. If your area is like mine, you will see a world of difference between the two types of homes.
I'm happy to hear I wasn't missing something when I heard all this myself. This just about sums it up. And yes, they do know what Medicaid homes look like as they have just placed a poor older relative in one close by. They also know what the nicer, self-pay ones look like. And still this conversation came up.

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Re: In Laws are estate/Medicaid planning - need help

Post by Doom&Gloom » Thu Jul 11, 2019 5:00 pm

Maven wrote:
Thu Jul 11, 2019 3:19 pm
Stinky wrote:
Thu Jul 11, 2019 2:58 pm

This is such a bizarre situation. You have a FIL who desperately wants to pass along a property to his heirs who really don't want it. Also, the FIL is willing to subject himself and his wife to Medicaid nursing homes rather than private pay, just to be able to pass along the property (to those who don't want it).

As suggested above, there are at least two things to do:
1. Get proper, local, legal advice.
2. Tour some nursing homes, both private pay and Medicaid. If your area is like mine, you will see a world of difference between the two types of homes.
I'm happy to hear I wasn't missing something when I heard all this myself. This just about sums it up. And yes, they do know what Medicaid homes look like as they have just placed a poor older relative in one close by. They also know what the nicer, self-pay ones look like. And still this conversation came up.
You are not alone. My 91 y/o MIL has/had assets far less than your in-laws, but she was dead set on leaving her money to her three children and wanted her relatively modest property to be kept "in the family." DW will inherit MIL's house but has no intention of ever living in it or renting it out. She might sell it to a niece or other relative--if they can afford it or even want it when the time comes. MIL also has a burning desire for Medicaid to pay for her nursing home care--if she ever requires it. Her thought process there is that she wants to get her share of "government benefits." She has always lived very frugally and has macular degeneration, so she is not at all put off by the condition of a nursing home. I believe that she believes she will just "give up and die" if ever placed in a nursing home, so that makes the location even less of an issue to her.

MIL has always been more than a little eccentric, but she locked onto those goals for reasons that only she completely understands. She insisted on putting her home and investments into an irrevocable trust so that she could eventually qualify for Medicaid. She only did this about three years ago, so it was a very late start.

People are strange creatures. No two are alike.

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