Buying a Home from Grandma... Legal issues?

July 29, 2009 9:21 AM

We are looking at buying my wife's grandmother's home from her before she goes into a senior living facility. What sort of implications could arise for her if we can all come to an agrement on us purchasing the home? Would the house still be considered an asset of hers if it was sold to us at less than fair-market-value?

We're in Wisconsin and recently my wife's grandmother decided that she can't maintain her home and wants to move into a senior living facility, possibly assisted living. If we were to buy the home for less than the fair market value, would the home still be considered as her asset if they are basing her "rent" at 30% of her income?

posted by ganzhimself to law & government (8 comments total)

I can only contribute a bit, but according to this, there is a "lookback" period of five years now where the home is considered an asset, for purposes of Medicare.
posted by adipocere at 9:24 AM on July 29

Seconding adipocere. Be really careful about this in terms of Medicare, and if she will eventually be on Medicaid. I know that in MO, there is a penalty period concerning transferred assets, but I don't know how universal that is by state.

This document might be useful. Look at the Asset Test section.
posted by honeybee413 at 9:52 AM on July 29

Also, Wisconsin has a Benefits Specialist program that your grandmother can take advantage of, free of charge, that may help her sort some of this out.
posted by honeybee413 at 9:53 AM on July 29 [1 favorite]

If we were to buy the home for less than the fair market value, would the home still be considered as her asset if they are basing her "rent" at 30% of her income?

Are you asking if the home, as Grandmother's asset, would affect gearing of her rent to her income; or, if a less than fair market value sale would mean the home remains Grandmother's asset for the purposes of certain calculatiosn of eligibility; or, do you mean that you would like to pay as little as possible for the home so as to minimize the extent to which the proceeds of the sale affect her income (and therefore her rent)?
posted by onshi at 9:59 AM on July 29

Are you asking if the home, as Grandmother's asset, would affect gearing of her rent to her income; or, if a less than fair market value sale would mean the home remains Grandmother's asset for the purposes of certain calculatiosn of eligibility; or, do you mean that you would like to pay as little as possible for the home so as to minimize the extent to which the proceeds of the sale affect her income (and therefore her rent)?

I'm not entirely sure what we're looking at right now. This literally just came up as an option to us as we're looking to buy a house and Grandma wants the house to stay in the family because her father built it. Now, what I'm assuming is happening is that she is moving, or looking at moving, into a senior community where rent would be based off of 30% or her income and assets (pension, social security, stocks and bonds, etc). I want to be armed with enough knowledge to make sure everything is done legally and to minimize the extent of her financial exposure. One option that I think is out there is that she could fully "gift" the home to us and take the hit on the gift tax and it would no longer be her asset. I don't want to do that, as we would like to buy the house from her, while minimizing her financials for rent's sake. We're hoping that the family has some more knowledge too, as we were just researching and filling our minds with all the things we needed to do to buy a home, and now there's even more to figure out if this is something that may become a reality.
posted by ganzhimself at 10:51 AM on July 29

Go see a medicaid attorney or medicaid estate planner. Also investigate whether the 30% is the best deal or the right kind of deal based on her income and assets. (Can you see a Rockerfeller paying 30% of his assets?).
posted by Gungho at 12:15 PM on July 29

Definitely see an attorney with experience in eldercare financial management about this. There are federal complications, state complications, and possibly complications with the assisted-living facility that need to be sorted out. You will save money by investing in experienced advice.
posted by Sidhedevil at 1:50 PM on July 29

Locate an Elder Law Attorney

While this may seem straightforward, legally, there are only certain ways this can be done properly. If you see an attorney who knows what they are doing they, and only they, will be able to advise you on all your legal options. The downside is very, very serious and expensive.

Also, I would advise anyone with a family history of debilitating illnesses (including dementia, cancer, etc.) to start end-of-life planning as soon as practicable. My dad pushed it off and pushed it off and now, much sooner than we ever expected, he is in a secure nursing facility (daily costs > $300) and we're scrambling to save what we can.
posted by dhartung at 10:01 PM on July 29 [1 favorite]