Selling a house to a family member, especially a granddaughter, can have implications for Medicaid eligibility. Since your parents may need Medicaid within a year of the sale to cover assisted living costs, it’s crucial to understand the potential issues.
The Issue: Medicaid Lookback Period
Medicaid has a “lookback” period of five years, where it reviews financial transactions to ensure applicants didn’t give away assets to become eligible. Selling a house for below market value to a family member may lead to a penalty period.
Potential Medicaid Penalties
If Medicaid determines the sale was below fair market value, your parents could face a period of ineligibility for Medicaid benefits. The penalty is calculated based on the difference between the home’s fair market value and the sale price. This penalty period means Medicaid won’t cover their assisted living costs for a specific time.
Key Considerations
- Fair Market Value. Getting an appraisal or identifying an objective fair market value is vital.
- Legal Documentation. Ensure all transaction documents are legally sound and clearly state the terms of the sale.
- Medicaid Rules Vary. Each state has its specific Medicaid rules. Consult with an elder law attorney in your state for personalized advice.
Seeking advice from an elder law attorney specializing in Medicaid planning is highly recommended. They can provide guidance tailored to your parents’ specific situation and state rules.
Disclaimer: This information is for general knowledge and does not constitute legal advice. Consult a qualified professional for advice specific to your situation.
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