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    #1

    GIFT of residence to son or daughter

    WHY is that attorneys continue to advise older parents to make a gift of their residence to
    their son or daughter? I believe this is done to qualify for Medicaid. I believe that this is
    illegal and if not, it should be.
    The tax results or making a gift to a son or daughter are horrendous. Are these
    attorneys misquided or do they know something that I do not know? Thank you for
    all comments.
    Last edited by dyne; 10-27-2006, 07:25 AM. Reason: typing error
    Tags: None
    #2
    As to the tax results, I'd rather pay $45,000 tax on selling my Dad's $300,000 house that he gave me, than having it all go to the nursing home and get nothing out of the deal.

    Its not illegal. The gift has to be made so many years prior to mom going into nursing home. It use to be at least 3 years. It may be more now, I don't know.

    Regardless, you can't make it forever. Say Mom gifts her home to Son at age 55 so she can move into a townhouse and enjoy retirement. She lives another 30 years before having to move into a nursing home. Are you going to make Son give back the house he got from her 30 years prior? Are you going to say that should be illegal?

    How many years does the gift have to be completed before it is no longer a "should be illegal" gift?

    3?
    5?
    10?
    25?
    Last edited by Bees Knees; 10-27-2006, 08:02 AM.

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      #3
      Life Estate

      Most of this type of gifting is done with a Life Estate attachment( Giving the parent(s) the right to live in the home the rest of their life). This is an incomplete gift and the kids get a stepped up basis on the date of death.

      Check the document and chances are this was done by the lawyer.
      This post is for discussion purposes only and should be verified with other sources before actual use.

      Many times I post additional info on the post, Click on "message board" for updated content.

      Comment

        #4
        Gift of residence to son or daughter.

        I suppose if the amount paid by Medicaid exceeds the tax paid upon the sale of the
        residence, it might be a good idea to make the house a gift. My son argued this very
        point. In the several cases I have encountered Medicaid never paid a dime yet the tax owed by the son or daughter upon the later sale of the residence was thousands of dollars. (the last was $30,000.00). In this area such homes do not generally sell for more than $120,.000 or so. There was No life estate involved in these cases. I have encountered several Life Estate issues and do not consider this to be a problem. Maybe that is what the attorneys are thinking about but not following through upon. I read that Congress was asked to make it a felony to make a gift of the residence to someone else, but apparently nothing came of it. Thanks for the comments. There is always two sides
        to every thing. Best wishes.

        Comment

          #5
          Remedy

          I'm not sure if there is a remedy when a lawyer screws up by not making a "Life Estate" attachment to a transfer of deed.
          This post is for discussion purposes only and should be verified with other sources before actual use.

          Many times I post additional info on the post, Click on "message board" for updated content.

          Comment

            #6
            Congress was asked

            >>Congress was asked... nothing came of it<<

            We just can't base our work on what someone hopes will be the law someday. As it stands, Congress has balanced the need to protect government programs with the need to protect families from financial ruin.

            Comment

              #7
              This reminds me of a client who gifted house to son based on atttorney recomendations. Infact if memory serves the father rented the house back from the trust which the son managed. Well guess what two years into this whole thing fatehr comes in to do taxes and looks likes h*ll. I said what is the matter? He tells me he had falling out with son and son is trying to evict the father out of his own home. Mind you the father was of sound mind and very wealthy. The son figured that the house was worth more now then when the dad died and he wanted his money now. Aren't kids great!

              Comment

                #8
                Originally posted by Bees Knees
                How many years does the gift have to be completed before it is no longer a "should be illegal" gift?

                3?
                5?
                10?
                25?
                Five years now.I don't know if this is state specific. But, even during that 5 year period "Dad's" money can be spent for his benefit. So, money can be spent on prepaying funeral expenses for instance.
                JG

                Comment

                  #9
                  Is is ethical?

                  Two questions: will Medicaid administrators (SSA) challenge a gift of a residence made soly to qualify the parent for Medicaid benefits?
                  And if not, is it ethical to make such a gift ? It is still tantimount to hiding of an assett, is it not? A book on SSA states that one can be eligible for Medicaid even if you own your home. It further says that some states set a dollor limit upon the value of the home.
                  The "forms versus substance" issue :ITC 1618 (59 SATC 290) indicates that when action is taken SOLELY for tax avoidance or tax purposes, it can be disregarded entirely. ( I am paraphrasing from memory, so please excuse me). I believe that such action might be considered to be fraud for IRS tax purposes. While Medicaid rules are at stake here, not federal tax; it is still under the authority of the SSA which is a federal government program. As an EA I am bound to do what is ethical. I am not finding fault with others, but I believe that transferring a gift of a residence with the intent to circumvent the Medicaid rules is wrong! The fact that Congress was requested to make it a felony to make such a gift is strong evidence that the goverment also believes this to be wrong! Thanks! Best wishes.
                  Last edited by dyne; 10-28-2006, 10:22 AM.

                  Comment

                    #10
                    Originally posted by dyne
                    A book on SSA states that one can be eligible for Medicaid even if you own your home.
                    It further says that some states set a dollar limit upon the value of the home.
                    I agree with dyne.
                    It is my understanding that a residence doesn't count against eligibility for Medicaid. Looks like the Lawyer must have had some other reason or he screwed up.

                    Comment

                      #11
                      The answer

                      The first website I found when researching Medicaid on Google advised that
                      assets in an estate after death can be used to pay off Medicaid expenditures incurred
                      after age 55. Every state has a differant set of rules. THAT is why some attorneys
                      advise that a Life Estate gift be established: to protect the residence from these
                      medical debts.

                      Comment

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