The 5 Year Look Back

[lwheel7]

Living in Louisiana

My father recently found out he has cirrhosis of the liver. It is not fatal at this time, though its very hard to determine how long he has before things could decline. He currently lives an hour away from any doctors. So we have decided to sell his current home and move him into the city. He does not have credit to buy a house, so my husband and I are going to buy the house and he is going to gift us the money for the down payment from equity he gets back with the sale of his current home. He is on disability but he has not applied for any social security to help him with his medical expenses as of yet. He has no other assets but from the equity in this house. Now I am aware of the 5 year look back. So if he applies for any government assisted living before 5 years of this money transfer, my husband and I could potentially lose this house? Is there a way around this? We have also considered putting our own house up for rent and moving in with him, when his health declines and he needs us around more. Also I would be afraid to put any money into the property, like replacing flooring or countertops, to gain value, for fear that it would all be lost IF he dies in 5 years.... which may or may not happen...?? How does the 5 year look back, social security, and home equity all play out?

 

[FlyingRon]

While you should probably talk to a lawyer, I suspect you are OK. A lot of it depends on whether he was already getting medicaid benefits when the "gift" was made;. Even if the gift was improper, the house is yours and can't directly be "clawed back".

 

[Taxing Matters]

Living in Louisiana

Now I am aware of the 5 year look back. So if he applies for any government assisted living before 5 years of this money transfer, my husband and I could potentially lose this house?

No you aren't at risk for losing the house. What is at risk is that he might be denied Medicaid or other benefits for some period of time to account for the assets that he gave away. The idea is that if he had not given that away he could have used the money to pay for the care that he is asking the government to over, so the government denies the benefits to effectively make him pay for that care anyway.

 

[HRZ]

THere may be smarter ways to have Dad pay towards his housing than a "gift" ..I am NOT up on details and Dad should do some more serious homework ...but generally getting something for fair value is NOT a gift...and a written prepaid business like lease for say 2 years ( or consistent with sums paid ) with option to renew yearly may sidestep the gift point .

And a business like lease with a profit motive may provide usefull tax deductions for you as LLs

 

[Whoops2u]

What are you going to do with the house? If you're going to live there, you might seek out an attorney to advise as to if a retained life estate might be useful if dad intends to return to his house someday. (The wink is because "intends to return" might not mean what you think intend to return means.) There might also be some consideration of taking a note for rather than making a gift of the equity.

 

[lwheel7]

You guys will have to excuse my ignorance... so what I am getting from some of these answers is, its all about how he transfers me the money?

We don't know that we will live in the house. It is a possibility. I suppose it depends on his health. We may be more likely to do so if that will protect us from losing it or the equity in it.

 

[FlyingRon]

You've not answered the questions but me and Taxing Matters gave you the best answers we can in general.

Social security is irrelevant here. The issue is MEDICAID.

Is Dad currently receiving Medicaid benefits? As pointed out by TM, what typically happens is he gets disqualified for benefits going forward (I had put that in my original post as well but apparently deleted it while editing things). The only time Medicaid is going to come after you is if he was already getting benefits and made an improper transfer to you. Even then, they can't directly take the house.

 

[lwheel7]

Sorry, I must have looked over your question. He IS on disability, and has People's Health Managed Medicare. I worry that with the worsening of his condition he may need to apply for medicaid.... and how this transfer of money could affect that. Which you did also answer, that he may be denied medicaid for some period of time because of the transfer. I read about penalties? So while they may not be able to directly come for the house, would we be smacked with a penalty bill ... ultimately resulting in us having to sell the house to pay it? Just some scenarios that have played through my mind...

 

[HRZ]

A transfer in form of a gift is a big problem as to look back and probable disqualification under rather Draconian rules

The actual purchase of something for about its reasonable value is NOT a gift...and he might be able to prepay a lease and not have alarm bells go off.

DAd needs more attention to the rules !

 

[FlyingRon]

Disability and Medicare are immaterial. Again it is MEDICAID that is the program of concern. People's Health isn't Medicare either, it's just a supplemental insurance plan.

Since you really don't seem to understand what is going on, I suggest you get Dad and yourself to an elder law lawyer. While you're at it you can discuss getting certain other things he will find useful int he long run: living will (advanced medical directives), regular and medical powers of attorney, etc....

 

[lwheel7]

Disability and Medicare are immaterial. Again it is MEDICAID that is the program of concern. People's Health isn't Medicare either, it's just a supplemental insurance plan.

Since you really don't seem to understand what is going on, I suggest you get Dad and yourself to an elder law lawyer. While you're at it you can discuss getting certain other things he will find useful int he long run: living will (advanced medical directives), regular and medical powers of attorney, etc....

WOW, while I do appreciate your responses, the rudeness is not necessary. I admit I don't fully understand and that is why I even posted my questions on this forum to begin with. I need to get more informed. Is that not what this is for.

Thanks for all the replies. While I figured I should contact a lawyer, all of your responses have helped (belittling aside).

Best,
L

 

[FlyingRon]

I'm not sure what you construe as belittling. I've been patient trying to extract the simple answer to the most relevant question and you've not been able to answer. I apologize for whatever you took offense at, but again, frankly, we aren't going to be able to help you as you don't possess the information needed to answer the question.

 

[lwheel7]

I'm not sure what you construe as belittling. I've been patient trying to extract the simple answer to the most relevant question and you've not been able to answer. I apologize for whatever you took offense at, but again, frankly, we aren't going to be able to help you as you don't possess the information needed to answer the question.

Upon skimming back through our conversation, the only question that I can conceive you actually asked me was whether he was on medicaid. My reply was that he is on disability and people's health (not medicaid - which I am aware is not the same, though I maybe should have stated?) and that I was concerned about when the time came that he might need to receive medicaid (assisted living), how the gifting me of a down payment to buy him a home could affect this. While I know it (gifting money to your kids) is a "no no" (in medicaid's eyes), I wasn't sure in what way we would receive the penalty, i.e. asking if the house could potentially be taken. From the replies, what I am comprehending to be the answer to this is, if he were to gift me money, then it would prevent his eligibility for medicaid were he to apply for it in the future. Correct me if I am wrong. If this is the case, then we need to consider alternative ways to make the transfer, rather than the form of a gift. Others on the forum have touched on those options. If there is more missing information that I have failed to contribute to the conversation, please clearly state.

Ultimately I need to speak to a lawyer. Thanks.

 

[FlyingRon]

If I ask you what color the sky is and you tell me that it's full of aircraft, you haven't answered the question.

If he is not receiving medicaid now, the worst thing that is going to happen is he will be disqualified if he applies for it soon. They won't come after the house because they will not have paid out anything.

As to whether the transfer would invalidate his medicaid eligibility is still a bit more involved than the information here seems to provide. Again, you should talk to an attorney before doing something rash. The attorney will certainly want to talk directly to your father to get the straight information (which is why we are disinclined here to deal with second hand information).