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  1. #1
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    Feb 2007
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    New York and Florida
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    Default Sale of Home With Life Estate to Fund Further Care of Mother

    In 1998 my mother signed ownership of her home to my brother and I while retaining a life estate. She now wants to move into a planned senior community and wants to sell the home to pay the fees to enter. My brother and I, of course, want to help her with this as much as possible. We only took ownership to protect the asset for her use.

    A lawyer has told us that the sale will be subject to capital gains taxes. The "Life Estate and Remainder Interest Table" says our share of the home is 58% because our mother is 81. The basis value would be one half of the original purchase price (my mom and dad bought the house together in 1992), plus one half of the value of the home when my dad died in 1996 as my mother's inheritance from him, plus any improvement costs. My brother and I would then be liable for capital gains on 58% of the difference between the sale price less expenses of sale and the basis value. We all live in New York State.

    Is this correct? Is there any way to reduce this liability? Apparantly if we gave the house back to my mother we would then be hit with gift taxes. Is that correct? All advice and suggestions are greatly appreciated.

  2. #2
    Join Date
    Jul 2006
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    5,438

    Default Re: Sale of home with Life Estate to fund further care of mother

    Your questions are all excellent.

    You really need to hire a tax CPA to give you guidance.

    Your questions are much too complicated for an internet forum.

  3. #3
    Join Date
    Nov 2006
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    27

    Default Re: Sale of home with Life Estate to fund further care of mother

    My wife and I researched this subject in a similiar situation and discovered some interesting things. Question: If your mother is covered by Medicare for long term care, then why would you liquidate the property to pay for this care? Since she deeded the property over to you and retained a life-estate over three years ago, Medicare cannot take the property to help pay for this care. They can take a persons property to cover long term care as well as other easily liquid assets. Many folks actually deed their property to their children or other family members to do just that, protect it from the government. There is a 3 year timeframe from the time the deed is created in which they can still take the property. Hope this helps and if this information is not correct maybe another member of the forum can enlighten us further.

  4. #4
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    Jul 2006
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    Default Re: Sale of home with Life Estate to fund further care of mother

    Quote Quoting springalot
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    My wife and I researched this subject in a similiar situation and discovered some interesting things. Question: If your mother is covered by Medicare for long term care, then why would you liquidate the property to pay for this care? Since she deeded the property over to you and retained a life-estate over three years ago, Medicare cannot take the property to help pay for this care. They can take a persons property to cover long term care as well as other easily liquid assets. Many folks actually deed their property to their children or other family members to do just that, protect it from the government. There is a 3 year timeframe from the time the deed is created in which they can still take the property. Hope this helps and if this information is not correct maybe another member of the forum can enlighten us further.
    Medicare does NOT pay for long term care. The OP's mom wants to move to a planned senior community; therefore, the OP's mom is does not require skilled nursing care. Please, do more some more research.

    melucci, in addition to seniorjudge's advice, have the deed & documents reviewed by an attorney in the correct jurisdiction. Mom may be able to rent her home which would leave the Life Estate intact.

  5. #5
    Join Date
    Nov 2006
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    27

    Default Re: Sale of home with Life Estate to fund further care of mother

    I understand that OPs mom does not require skilled nursing care, so does not qualify as long-term care. But...how does a senior with little or no income, without any personal assets and on Social Security only, pay for long term care when it is needed? Does not Medicare support this care?

  6. #6
    Join Date
    Jul 2006
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    163

    Default Re: Sale of home with Life Estate to fund further care of mother

    Quote Quoting springalot
    View Post
    I understand that OPs mom does not require skilled nursing care, so does not qualify as long-term care. But...how does a senior with little or no income, without any personal assets and on Social Security only, pay for long term care when it is needed? Does not Medicare support this care?
    No, Medicare does not support this care. Medicare pays 100% for nursing home care for 20 days only with a QUALIFIED admission. Then, the resident pays a co-pay (more than $100.00 per day) for up to 100 days ONLY if the resident can make more medical improvement from therapy. Once MMI is obtained, at any point between day 21- 100, the resident then must pay for his/her nursing home stay and all ancillaries. Some supplemental insurance policies do pay for this.

    Medicaid, state funded, pays for indigent people. I just read that the look back now for all 50 states is 5 yrs. Florida legislators are discussing to make law that the look back go back 10 yrs. due to elders disposing of their assests.

  7. #7
    Join Date
    Nov 2006
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    27

    Default Re: Sale of home with Life Estate to fund further care of mother

    So, Medicaid pays for long-term care for seniors who are considered "indigent"? What constitutes "indigent"?

  8. #8
    Join Date
    Jul 2006
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    Default Re: Sale of home with Life Estate to fund further care of mother

    Quote Quoting springalot
    View Post
    So, Medicaid pays for long-term care for seniors who are considered "indigent"? What constitutes "indigent"?
    That (constituting one indigent) has 50 different answers. One for each state. Each state has its own qualifications for Medicaid. Time for more research.

  9. #9
    Join Date
    Feb 2007
    Location
    New York and Florida
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    2

    Default Re: Sale of home with Life Estate to fund further care of mother

    Quote Quoting springalot
    View Post
    My wife and I researched this subject in a similiar situation and discovered some interesting things. Question: If your mother is covered by Medicare for long term care, then why would you liquidate the property to pay for this care? .
    To clarify what we are trying to accomplish: Our mother wants to liquidate the home to pay the entrance fees to a planned senior community that provides housing and support for the rest of her life. After paying a lump sum to enter, a senior pays a monthly maintenance fee. The plan then provides residency, a long term health insurance equivalent, and guaranteed placement in the assisted-living or skilled-nursing-care areas of the complex.

    The suggestion to rent the home to preserve the asset is a good one, but my mom cannot afford the entrance fees without liquidating the home.

    Thank you all for your comments. Are there any other options?

  10. #10
    Join Date
    Nov 2006
    Posts
    27

    Default Re: Sale of home with Life Estate to fund further care of mother

    I would consider mortgaging the property with possibly a home equity line or just a straight up finance to provide you the necessary funds for your mother. You would still own the property and it would, hopefully, continue to appreciate in value. This way you would have the money you need for your mother and you would not have to sell it......just an idea.

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