Can I Buy My Mother’s Home Just for the Outstanding Mortgage?

 In Long-Term Care Planning

Question:

If I purchased my mother’s home for the amount outstanding on her mortgage, will her Medicaid benefits stop? What happens if she has to move to a nursing home? My understanding is only if she were to have extra money. Also if I have already been living there for 12 years.house transfer

Response:

Assuming that the house is worth more than the mortgage, your mother would be deemed to be making a gift to you of the difference between the fair market value of the home and the amount of the mortgage. For instance, if the house is worth $250,000 and your mother has an outstanding mortgage of $100,000, she would be making a gift to you of $150,000.

This may or may not affect your mother’s current benefits depending on which state you live in. Some states impose a penalty for transfers for community benefits and some do not.

However, all states have a five-year look back period for nursing home coverage. If your mother went to a nursing home within five years after the transaction, she would have to report it and it would cause her to be ineligible for benefits for a period of time based on the value of the gift. (You can read more about these rules here.)

Fortunately, you may qualify for an exception. There’s no penalty for transfers of homes to so-called “caretaker” children. You would have to be able to prove that you lived in the house for at least two years before you moved to a nursing home and that your living there helped your mother stay in the home for at least two years. (You can read more about this here.)

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