Sale of primary residence

[Kingofthepar3s]

I have a client who was advised by his attorney to put his children on the deed to his home with him having life use.  This is common here in NY State to prevent Medicaid from selling his home if he has to go in a nursing home in the future.  I have told my client if the home is sold while he is alive, they, the children, are part of the sale and have a tax responsibility.  Their attorney told them it is implied they will get FMV at the time of sale as FMV was "implied".

Has anybody had a similar case?

B. Tehan

[IRonMaN]

Unless there is a death involved, nobody is entitled to receive a step up in basis to FMV for any assets.

[jeffmcpa2010]

Might want to check and see if the attorney thought about having a Gift Tax return filed at the time of the gift as well........

[BobKamman]

Estate planners in New  York do a lot of things that aren't common in the rest of the country, although the desire to go on welfare seems to be national.  Medicaid doesn't sell anyone's home, they just have a lien on the proceeds if they have paid out benefits, and sometimes the lien is for more than their actual payments.  

Your client advised his attorney that he wanted the state to pay his final expenses so his children could enjoy his wealth.  Irrevocable trusts are used for that  instead, in many states.  There are tax consequences to those, also, although gift tax is not really an issue for 99% of people. It's like laws prohibiting cannabis or cohabitation, no one is going to enforce them.  

[qbteachmt]

Find out if the attorney did it right or wrong.

Listing everyone on the deed, either as Joint or as Tenants in Common = wrong.

As a Transfer on Death deed, filed and recorded = right.

Here:

https://nysba.org/new-york-now-allows-transfer-on-death-deeds-but-should-you-use-them/?srsltid=AfmBO...

[BobKamman]

Transfer on Death (Beneficiary) deeds don't help with Medicaid qualification.  If that was used, it was definitely wrong.  

[qbteachmt]

I thought this was the issue: "I have told my client if the home is sold while he is alive, they, the children, are part of the sale and have a tax responsibility. Their attorney told them it is implied they will get FMV at the time of sale as FMV was "implied"."

To inherit and get a full step up, they should not be on the title at all right now.

[BobKamman]

The client's objective in seeking legal advice was "to prevent Medicaid from selling his home if he has to go in a nursing home in the future."  He wants to eat his cake and have it too.  

[Taxes-by-Rocky]

Obtain a copy of the deeds before and after the transfer and determine what type of transfer occurred, if any, and to/from whom.

[qbteachmt]

"The client's objective in seeking legal advice was"

Yes, and that's what the lawyer provided. But this wasn't the ask, here. It isn't, "How should my client's family have done this for purposes of Medicaid?" It's about the tax, "if the home is sold while he is alive, they, the children, are part of the sale and have a tax responsibility."

[BobKamman]

---

@qbteachmt wrote:

Find out if the attorney did it right or wrong.

Listing everyone on the deed, either as Joint or as Tenants in Common = wrong.

As a Transfer on Death deed, filed and recorded = right.

Here:

https://nysba.org/new-york-now-allows-transfer-on-death-deeds-but-should-you-use-them/?srsltid=AfmBO...

---

That doesn't seem to answer the ask here, though.  

[The-Tax-Lady]

The Federal Medicaid Estate Recovery program exists for all States. Estate Recovery procedures go into effect once the Medicaid recipient is deceased. The only ways to simply prevent the Recovery process, as I understand it, are to have all the assets in an Irrevocable Trust or to sell the assets 5 years prior to the recipient's death, in most States, at the current fair market value, if sold to a family member.

There are also strategies used by Elder and Estate planning attorneys to protect assets, which can be complex, expensive and time sensitive. One way to think about estate recovery is that Medicaid “loans” beneficiaries financial support for long-term services and supports, and once the person becomes permanently institutionalized or passes away, the interest-free loan becomes due back to the state. However, no mention is made regarding the Estate Recovery Program, when applying for Medicaid.

Medicaid Estate Recovery is not just when a recipient enters a care facility, it applies to all Medicaid payments made for a recipient, over 55 or permanently disabled at any age, and receiving benefits when they die. It can be a very large total, even without any final care facility expenses. If you are low income and eligible for one of the 4 Medicare Savings Programs, you may not be subject to the Estate Recovery Program for those benefits.

There are a few exemptions for spouses, dependent or disabled children and others who lived with and provided support which kept the Medicaid recipient from entering a care facility, and the Estate Recovery would force that individual to seek State financial assistance themselves for housing ,food and medical costs. These are all very limited and decided on a case by case basis by the State and may only postpone the recovery.

In Ohio, up until 2005, the state could only try to recover from probate assets, but in House Bill 66, the definition of “estate” was expanded to include any property in which the Medicaid recipient had any interest at the time of death. This includes assets in a living trust, joint assets, transfer-on-death and payable-on-death assets, and life estates. Wills are disregarded by the State.

 I think Ohio recently announced recovering around 11 million, through the Estate Recovery Program. Just some FYI for those gracefully aging, like myself.😁

[BobKamman]

According to an HHS website, 

"Procedural rules are intended to ensure that individuals are informed about Medicaid program requirements before they complete the application process. States are advised to tell applicants about the potential for Medicaid estate recovery during the eligibility determination process."

https://aspe.hhs.gov/reports/medicaid-estate-recovery-0

Many years ago, I had a client who received about $200 a month in home healthcare services under Medicaid.  When she died, the state filed a lien for the "per capita" expense for the average Medicaid recipient, which was something like $2,000 a month.  I think we managed to avoid it, and I don't know if they do the same thing today.  

In most cases, the state does not take the house when a Medicaid recipient dies.  It has a lien on the house, for the amount of benefits paid.  Some people who criticize government welfare programs all their lives, go to extraordinary lengths to make sure they qualify for this one.  Others, don't.