Gatormom, if your mom is separated, does she have title to the house outright? Just thinking that separated spouse may still have a claim to it and could cause issues for you and your brother. Also be careful about selling the house to a sib because of Medicaid spend-down issues, if that is a possible scenario.
@CountingDown - she does have title outright.
Tell me about Medicaid spend-down issues. Would they see that as a ploy to hide assets?
When my mother died, her will named me and my brother co-executors. My brother signed a paper at the attorneys office that gave up his rights as executor, then this meant that I was the only executor. I think I signed something too to agree.
There is a five-year lookback period for distributing assets as part of qualifying for Medicaid – basically, to keep a senior from giving away all his/her assets and then getting on Medicaid.
Here’s a general overview. https://www.caring.com/questions/what-is-a-spendown Because Medicaid is run by the states, different states will have different requirements and exemptions. If your mom has adequate assets to cover her expenses in assisted living, etc., then she may never need Medicaid and you don’t have to worry. If you have an attorney who handles elder care issues, I’d make an appointment and lay out your situation with the house, assets for her care, etc., so you all can plan accordingly. There are some ways to protect assets while still ensuring care, but one must be meticulous about following the rules.
You should look into in home Medicaid if your state has it. We have had my MIL on it for a couple of years now. She worked in nursing homes and made us swear never to send her to one and since her only income is SS, she couldn’t afford AL anyway. This program allows her to stay in her house and doesn’t take its value into consideration. When she dies, H will inherit the home and there will be no reimbursement required. This program can work if your elder is mentally competent and/or doesn’t wander. MIL is all there in the mental status area and can hardly walk anyway, so wandering is not an issue. There used to be just a 90 day lookback, but I understand that is no longer an issue.
This program has been great for MIL. We are now in the process of trying to get her 24 hour aides; she currently has 6 - 8 hrs 7 days a week. There is a program where you can pick your own aides. Oldest son’s gf is interested and if it’s a go, the two of them would move to MIL’s house and live there. GF would be the overnight aide. Her current aide is willing to do 7 - 7 PM. This would be perfect for us because my sister-in-law, who lives with MIL, bullies and mistreats her when nobody is around. MIL refuses to press charges or have her evicted. My son and his gf would kick her butt if she did it in front of them.
This plan also covers things like her adult diapers, her diabetes supplies and her other meds. She gets 2 meals on wheels each day as well.
If I could, I would take her into my home but she refuses to come without her D and H refuses to have his sister in our home. Therefore, Medicaid in home has been a blessing for all of us.
^^^But some states clawback Medicaid expenses via the sale of the primary residence after the Medicaid recipient passes – my dad’s state does this.
The parent could sell the house to the child (or anyone else) but the sale would need to be for fair market value; if for less than FMV, the difference might be treated as a divestment for Medicaid purposes. If the parent sold the house, the proceeds would be available for nursing home or other expenses, which, of course, is fine. I don’t know the income tax ramifications (i.e., step up in basis versus no step up in basis); those might be significant considerations for parent-seller and child-buyer.
Following up on @rosered55’s comment…I don’t know if the recent tax bill affects the step-up basis treatment of real estate, but if the mom received title to the house after a divorce and has lived in the house a long time, there may be capital gains tax to consider. If that is the case, and if the tax law did not change the set-up treatment, it may be better to continue having the brother fund and then reimburse after death.
The look back is tricky. In many cases, we have to accept that our “inheritance” comes after their needs are met.
Techmom, I might wonder if your SIL would be tough to move out, if she’s been there a while and claims any caretaker role.
My 80 year old aunt is stuck in a split-level that totally doesn’t suit her. She has problems with her hips and knees and uses a walker. But she refuses to sell because she wants to leave it to her kids and doesn’t want to pay the capital gains (she has about 800K in equity).
@tx5athome – could she rent it out and move to a one-level home?
Was she married, and if so, did her H die somewhat recently? My vague understanding of the topic is that half of the value of home steps up to market value upon death of spouse, and that she would then add her $250K exclusion to the cost basis of her ‘half’ of the home. The capital gains may not be as high as she thinks, assuming there was a spouse and he did not die all that long ago.
Talked to brother today about house situation - it was put into a “life estate” about 10 years ago, so well out of the lookback period. This is FL …
@gatormama, if your Mom’s home has been around a long time and appreciated, you might want to rent it to a stranger or to your brother as long as she is alive. At her passing you would get a stepped up basis and avoid capital gains taxes.
@CT1417 her husband died in 2001. Southern California real estate has taken off considerably since then. So maybe capital gains are more like 500K? I am not sure. But she is very, very stubborn.
I think the house is already in my brother’s name. He and mom are on the life estate, whatever that is, together. So no taxes at death, @somemom
@tx5athome --Yes, I understand, and am dealing with a similar situation. In the midst of having a ground floor W/D installed and researching a safer tub option.
Given that her H died that long ago, I can understand the calculation. Good luck!
@gatormama It sounds like your brother is a good guy, but just realize there is no legal obligation for him to give you half the value of the house when your mom passes, or whatever else is in the life estate.
I thought you lose the capital gains exclusion if you rent your home for longer than 2 years. It then becomes income property rather than your personal residence, no? We looked into renting ours while we temporarily lived out of state, but since that period could be longer than 2 years, we dropped the idea. We owned our home over 30 years, so capital gains would be a killer, even in our more modest market.
I can’t be of much help on the capital gains questions; my mother sold her condo nine years ago and moved in with us. But as to her changing her will, I do have a family attorney who is completely familiar with what is going on. I’ll email him and see if there is any chance of her changing her will to a single executor. Thanks for the suggestion. Stuff she left to him and his kids, she has already given him, so there is all of that mess, too. But if she has to be competent, we are lost.
Starting hospice care for my dad today in his home. CHF. Feeling just so sad.