Buying my grandmothers house...questions

Kirby Allen · 2013-07-04T11:32:15-07:00

My grandmother moved into a retirement home type facility a little over a year ago and her house has been sitting empty since while she still pays the mortgage on it. Recently it has been brought to my attention that she needs to get it out of her name if she plans to recieve any government assistance from medicare or medicaid if she was to have to move into an asssted living facility. The house has to be out of her name for atleast two years. Here is where my questions begin. The house would end up being left to my mother, which would in turn be left to me, my brother and sister. My mom asked me if I would want to purchase it for whats left owed on the house. I believe the amount still on her mortgage is approx 48k. The house is worth around 100 conservatively. Has anyone dealt with a situation like this previously? Legally im just trying to make sure we are all swuared away. Would i need to go ahead and place my brothers name and sisters name on the deed to avoid having to do it later when we sell it? I know the first fear is family screwing each other in most cases, but not an issue here. I want to turn it into a rental as it is in a great location for our town, but have so many questions...

Account Closed

Involved In Real Estate · Member since 2013 · 16 posts · 2 votes

13y

First, the fewer names on the deed the better. You would be better to enter a side agreement about how it is to be split up. If the three of you can come up with the $$ I would pay off the bank and have G-ma quit claim it to you. There may be some tax concerns with the $52k gift, but sooner or later they will have to be paid.
This is really a situation best left to a tax attorney or CPA. Getting the house in your name is the easy part. Good luck.

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Account Closed

Involved In Real Estate · Member since 2013 · 16 posts · 2 votes

13y

Keep in mind once grandma sells the house, she now has $100k, which she might have to use up in order to qualify for benefits.

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Jon Holdman

Rental Property Investor · Mercer Island, WA · Member since 2008 · 22k+ posts · 14k+ votes

13y

You're potentially on some very shaky ground here. I've been through a bunch of this recently, but this is complex stuff.

First medicare and medicade are two very different beasts.

Medicare: Health insurance for the elderly. Only provide limited benefits for any sort of assisted living or skilled nursing facility. Basically, you need to spend (IIRC on all of this) three midnights in a hospital you can get skilled nursing benefits for a short period of time. 21 days comes to mind, but I'm not sure. Assets are irrelevant.

Medicade: Health insurance for the poor. Does provide some skilled nursing or assisted living facilities. Assets do matter. They do a five year lookback, not two. If your grandma sells you a $100K house for $48K, they will find it and she will have penalties for Medicade benefits.

If your grandma sells you the house for fair market value, there are no penalties. But she will end up with the amount of equity, $50K in this case, as a cash asset instead of property. So, it doesn't help her case for getting on medicade, if that's the goal here.

Notwithstanding the medicade penalties if you buy the house for $48K, if you buy this, its now YOURS and yours alone. Not mom's. Not your siblings. After grandma passes, what does your mom expect? You to give the house to her, since she was going to inherit it?

The bottom line is there is something like $52K of equity floating around (less after selling costs.) That's grandma's money. That money has no effect on any medicare eligibility, but If she (or the rest of you) want to eventual have medicade paying for her housing, the proper procedure is for her to spend that $52K first. Medicare is very well wise to people "giving away" assets to make themselves appear poor.

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Colleen F.Pro Member

Investor · Narragansett, RI · Member since 2013 · 8k+ posts · 4k+ votes

13y

This really is a complicated and possibly emotionally charged situation. You need to find out, is your grandmother in charge of her own affairs or is your mother managing them for her. If your mother is managing them in what legal capacity, does she have power of attorney? If so when did she get power of attorney and was it signed over by your grandmother or did she go to court to get it? Take that information to a lawyer and tell them that you want to buy the house and how do you do it legally.

I would say if you buy the house, you buy it alone or with your siblings equally. I would not advise you buy out the mortgage and they take their inheritance. If you own it with your siblings it is best if you decide how expenses are split and put your arrangement in writing. Make sure there is a written agreement on if the house will be insured and to what extent. Who will live there and for what rent?

My experience with my parents estate is that a home can be a challenge to relationships. A major event like a fire or flood without written agreements in place results in problems. Who should have paid the insurance and didn't? Where does the tenant sibling live when the house is being repaired. Who carries the house during that time. I cannot begin to tell you all the issues we have had. It is worth enduring a little upfront criticism for being overly cautious and getting your own lawyer to discuss this with rather then the long term consequences of winging it. It will help your relationships and your potential investment in the end. Although I wanted written agreements I did not push hard enough on the house especially for fast resolution. It is 3 years now and no end in sight. A little upfront investment of your time could save you alot of issues later.

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Kirby Allen

OP

Muscle Shoals, AL · Member since 2013 · 16 posts · 3 votes

13y

Tim, Thanks for your insight. I have struggled with this decision very much lately.

Jon, the whole Medicaid Medicare explanation was spot on. This proposition was just brought to me at the beginning of the week. I will dive into it deeper and see what she is planning.
As far as my mother is concerned, she said it is going to end up going to us anyway down the line and that part doesn't concern her. She wouldn't want it nor repayment for it when my grandmother passes. Splitting the home with my siblings makes me wonder exactly how it would work. Wether i use it as a rental for a few years and sell it down the road or decide to hold it indefinitely. Now as far as the 52k in equity that is floating around. If I purchased it from her at fmv I will have to consult someone on what exactly she could spend 52k on without having issues. I figured they were hip to the game of people getting broke suddenly. I'm trying to find the most legal way to go about it to keep my head and everyone else's out from under the government guillotine.

Colleen, My mother is handling her affairs with full power of attorney. It was signed over to her by my grandmother before she left home. My mother still discusses every aspect with her before any decisions are made.
As far as buying it with my siblings, one has 1 year left in law school and the other is about to begin her first year at dental school in the fall. They are not financially able to split the home with me as of this point in their lives financially. As far as tenant it wouldn't be family living there as they are both in different cities and I am also in a town 30 minutes north of the house.

Thank you all for your responses and insight into this situation as I am learning as I go. It seems the first thing to do would be to meet with a lawyer and discuss what road would be the best for grandmother and for everyone else as well. You all brought up very valid points that I hadn't thought of in depth yet.

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Buying my grandmothers house...questions

Buying my grandmothers house...questions

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