Creative Uses Of Real Estate Can Pay For Care

Creative Use Of Real Estate

When seniors need help for care, they may be cash poor but living in a home with substantial equity.

One common reaction when dealing with care is to transfer the house to the children and then, if moving to a nursing home, immediately apply for Medicaid. This is usually a mistake unless there is a clear exception such as disabled child or Caretaker Child and can disqualify parents for benefits.
Another idea is to sell the house, spend down the funds in assisted living, and when the money runs out, move to a nursing home and apply for Medicaid. This does have the appeal of living in a more attractive environment for a longer time. You may consult with a real estate attorney to get legal advice on the transfer of your parents’ real estate properties.

Tax breaks for assisted living expenses, when properly used, can stretch the funds. Veterans’ Aid and Attendance benefits, for those who qualify may provide another resource. Assets need to be monitored to extend the stay in assisted living.

It is not a good idea to wait until funds run low before applying for nursing home admission since nursing homes prefer admitting new residents who are able to pay privately for a period of time before Medicaid picks up the cost. Some nursing homes do not accept Medicaid.

Reverse mortgages might provide another alternative but you have to be careful. They relate to people who intend to stay in their homes indefinitely and can offer a way to access the cash value of the property . They help in some cases but if the senior’s condition worsens to the point that she has to move to assisted living/personal care or nursing home and the house is unoccupied for over a year, the mortgage would go into default.

There is no one right answer for everyone but when it comes to using the equity in the family home, creative solutions can stretch the funds.

Here are some ideas.

Family Agreements can use real estate equity to compensate family members who help and those who contribute.

The majority of Medicaid (government) funds are used to pay for nursing home care, and not for at-home care although there is an at-home Medicaid waiver program. As one possibility, a senior can “hire” her children privately to help with her care while extending her time at home and compensating those children and family members who actually assist her. Another is to set up a system where adult children contribute financially toward paying for care by an outside caregiver and other expenses needed by the parent.

There needs to be a written agreement. It needs to be entered into before services are performed or payment made –read about their services here. Over the past few years, our office has prepared increasingly more Family Agreements.

Readers might ask where the senior can get the funds even to pay family.
Here are some ideas.

Here are some ideas.

Private Mortgages and Private Reverse Mortgages. We might prepare a Mortgage where the holder of the mortgage is the adult son or daughter. In exchange for working for mother or for contributing to her support, the son or daughter could have a recorded document reflecting his or her contribution – a mortgage or a private reverse mortgage for the amount of the contribution. The adult child could “buy in” to the value of the house.

Joint Tenant With Right of Survivorship. An adult child could buy fifty percent of the value of her mother’s residence and actually pay for it. The cash from the child can be used to support mother’s care at home and assisted living expenses if mother moves. On mother’s death, the child would become the sole owner of the property.

Life Estate. Mother could sell her home and move in with son or daughter. Under federal law, mother could, without losing her right to Medicaid benefits later, buy a life estate in son or daughter’s home and pay them for the life estate as long as she lives for at least one year in their home after the purchase. For more questions on real estate laws, one may consider consulting an experienced real estate lawyer. An expert real estate lawyer can help with any residential transactions, commercial transactions, title searches, institutional and private mortgages, resale, re-financing, title insurance, etc.

Rental and Contribution to Household Expenses. Mother or father could sell their home and move in with son or daughter and pay reasonable rental or contribution to household expenses under a written Family Agreement.

About the Author Janet Colliton

Esquire, Colliton Law Associates, P.C. Janet Colliton has practiced law for over 38 years, 37 of them in Chester County, Pennsylvania, a suburb of Philadelphia. Her practice, Colliton Law Associates, PC, is limited to elder law, Medicaid, including advice, applications and appeals, and other benefits planning including Veterans benefits, life care and special needs planning, guardianships, retirement, and estate planning and administration.

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