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Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 29969
Experience:  Taxes, Immigration, Labor Relations
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My sister's dad is in bad health.(heart,cancer,etc) Her

Customer Question

Hi, my sister's dad is in bad health.(heart,cancer,etc) Her step mom is in a nursing home. There are 3 grown children involved. Her step moms son, her, and her younger brother which belongs to her dad and to her step mom.
Her dad is distraught that he is going to pass before his wife and if so then medicaid will take the house. Or that he will die first and she will somehow get well enough to come home and there won't be a home because medicaid took. He wants to transfer the title of the main home to my sister and her younger brother.
If my research is correct I have come to the conclusion that her step mom can transfer the home title to the community spouse which remains living in the home(which is her dad) and then her dad can transfer to her and her younger brother. When they sell the house which will not be until her dad passes, they will each have to pay a capital gains tax.
Here are my questions: What would be the date acquired? The date her dad transferred to them?
The basis would be the cost of home, any expenses of the sale and any repairs to the home over the years?
And would it be considered a long term gain or not?
And what ever amount was to be taxed as capital gain, would that be taxed at 15%?
What kind of form would need to be signed by the step mom and then by the dad?
Is an attorney required or just a notary?
If her dad has power of attorney for her step mom, can he sign the form for the transfer to himself without bothering the step mom which has Alzheimer's?
If he doesn't have power of attorney yet, can he get it and what are the steps?
And would the form that needs to be signed by the step mom need to be filed and recorded first before her dad could transfer to them? Or could both transfers be filed at the same time?
Also I read about the tax gift limits but its kind of confusing. When it says it's a 14,000 limit per person each year, is that referring to just cash? if not, can he gift 50% of a house to each child which is worth more than 14,000 in a one yr period without being penalized?
None of them have a lot of money. Her dad has not been able to work for some time now and he lives off of SS. My sister is disabled and lives off of SS disability raising her 2 granddaughters. So any kind of way that I can save them money by helping them, to not loose the house and on not paying a lot of taxes when I file for them, then that would be awesome!
I know that is a lot of questions!! Thank you so much for your time!
Submitted: 2 years ago.
Category: Tax
Expert:  Lev replied 2 years ago.
Hi and welcome back to our site!
I will address your question one-by-one
.
What would be the date acquired? The date her dad transferred to them?
A.
In most situations - that woudl be the date the title is registered in the county where the property is located.
.
The basis would be the cost of home, any expenses of the sale and any repairs to the home over the years?
A.
Based on your information - the property will be gifted.
The basis of the gifted property is the lesser of (1) donor's basis and (2) the fair market value (FMV) at the tome of gifting.
The donors basis is the original purchase price adjusted by improvement expenses and some other items.
.
And would it be considered a long term gain or not?
A.
When donor's basis is used - yes - that woudl be treated as long term because donor's holding period is considered.
.
And what ever amount was to be taxed as capital gain, would that be taxed at 15%?
A.
The tax rate would be based on total income, filing status, deductions, etc.
For most taxpayers - the long term capital gain rate is not more than 15% - but the actual rate woudl be based on circumstances.
.
What kind of form would need to be signed by the step mom and then by the dad?
A.
In general - for that purpose the quit claim deed form is used
Here is an example
http://www.tidyform.com/download/louisiana-quitclaim-deed-form-2.html
I would contact your county and verify if they have any pre-approved form - and if they will accept the form you are using.
Please verify - there are four pages.
.
Is an attorney required or just a notary?
A.
The law doesn't required to use an attorney for such transfer - that would be your choice.
The notary might be required to acknowledge the signature.
.
If her dad has power of attorney for her step mom, can he sign the form for the transfer to himself without bothering the step mom which has Alzheimer's?
A.
Yes - that is possible to use POA.
However - when the person is medically disables - a durable powers of attorney generally should be used.
Under Louisiana laws - the power of attorney is automatically durable, meaning it will not expire when the person becomes incapacitated.
.
If he doesn't have power of attorney yet, can he get it and what are the steps?
A.
In this case - the issue would be more complicated and most likely you woudl need to consult with a local attorney.
If the person is not capable because of medical condition - that person may not sign the POA.
You would need to obtain a legal guardianship via the court ruling.
Following article provides some details.
http://www.alzheimers.net/guardianship-for-parent-with-alzheimers/
http://www.advocacyla.org/tl_files/publications/LegalStatus.pdf
.
Let me know if that answered your questions.
Customer: replied 2 years ago.
Hi! Yes you did great actually!! Thank you so much!! I just would like to clarify that my research is correct. This was posted:
Married person.
A married person who applies for Medicaid coverage of nursing home costs can transfer the following assets without any penalty:Home. A married Medicaid applicant can transfer home title to his or her spouse who remains living in the home (the "community spouse"). The community spouse can then, if he or she wants to, transfer title to an adult child or someone else. This double transfer takes the house out of the nursing home resident's estate and therefore is beyond the reach of Medicaid reimbursement when the community spouse dies.
Expert:  Lev replied 2 years ago.
Federal law requires states to recover all property and assets that pass from a deceased person to his or her heirs - that is so-called Medicaid recovery program.
At a minimum, states must recover amounts spent by Medicaid for long-term care and related drug and hospital benefits, including Medicaid payments for Medicare cost sharing related to these services.
The lookback period for transfers and gifts is five years.
.
Estate recovery is prohibited in certain instances when Federal law deems that the needs of certain relatives for assets in the estate take precedence over Medicaid claims
States are prohibited from making estate recoveries:
During the lifetime of the surviving spouse (no matter where he or she lives).
From a surviving child who is under age 21, or is blind or permanently disabled (according to the SSI/Medicaid definition of “disability”), no matter where he or she lives.
In the case of the former home of the recipient, when a sibling with an equity interest in the home has lived in the home for at least 1 year immediately before the deceased Medicaid recipient was institutionalized and has lawfully resided in the home continuously since the date of the recipient's admission.
In the case of the former home of the recipient, when an adult child has lived in the home for at least 2 years immediately before the deceased Medicaid recipient was institutionalized, has lived there continuously since that time, and can establish to the satisfaction of the State that he or she provided care that may have delayed the recipient’s admission to the nursing home or other medical institution.
In additional the federal law requires to waive recovery where it would cause undue hardship for survivors.
Customer: replied 2 years ago.
"The lookback period for transfers and gifts is five years." That statement is actually referring to when a person "applies" for medicaid. At the time of the application they look back to the past 5 years to see if any transfers or gifts have been done.Thanks again!
Expert:  Lev replied 2 years ago.
That is correct - same lookback period is used for Medicaid application and for Medicaid recovery program.
However - while on Medicaid - all such transfers must be reported.
Customer: replied 2 years ago.
ok thank you for the info :)
Expert:  Stephen G. replied 2 years ago.
Disregard this post. The system has locked me out & won't clear unless I respond as you originally asked for me. Steve G.
Customer: replied 2 years ago.
@Stephen: I didn't even realize that I didn't get the attorney I requested. Why is [email protected]: Just wondering why is it that another attorney is saying different than what you are saying about what I posted previously " that if a married spouse medicaid applicant, transfers the home title to the community spouse and then the community spouse can transfer to someone else, then this double transfer takes the house out of the nursing home resident's estate and therefore is beyond the reach of Medicaid reimbursement when the community spouse dies"?(meaning without the 5 year Medicaid recovery program being able to reach)
This attorney would be Joseph L. Matthews an attorney in the San Francisco Bay Area, the author of Social Security, Medicare, and Government Pensions; Long-Term Care: How to Plan and Pay for It; How to Win Your Personal Injury Claim; and The Lawyer Who Blew up His Desk.
I question this because I just need to be sure of what is correct. Thank you :)
Expert:  Lev replied 2 years ago.
Sorry I may not investigate what someone else is saying.
You may contact that person directly and ask for reasoning and references to specific statutes on which his conclusion is based.
There are might be special circumstances which may be used in the court to defend such position.
I may examine these references if needed.
Otherwise - sorry - I have nothing to add...
Customer: replied 2 years ago.
I'm sorry I hope I didn't offend in anyway because that was not my intention. I was just trying to find out the correct answer. :)
Maybe you can answer this for me. If my sister's dad has heavy equipment in his name "only" that he used and his son still uses for business can medicaid try to recover on those items?
And if he has items in a safe deposit box that is in his name "only" too?Thank you
Expert:  Lev replied 2 years ago.
I clear understand your intention...
If my sister's dad has heavy equipment in his name "only" that he used and his son still uses for business can medicaid try to recover on those items?
A.
The Medicaid not just could - they are REQUIRED by the federal law to recover all assets - and most likely - they will.
However under certain circumstances - his son and other family members may claim an exclusion from garnishments.
.
Section 1917(c) prescribes certain rules where individuals who are seeking Medicaid coverage for LTSS have transferred assets for less than fair market value before, and subsequent to, applying for Medicaid. Specifically, this provision requires that, if an institutionalized individual, or the spouse of an institutionalized individual (or, at state option, a non-institutionalized individual or the spouse of a non-institutionalized individual) disposes of assets for less than fair market value on or after the individual’s “look-back” date, the individual is ineligible for medical assistance for institutional services (or other LTSS). A penalty period based on the number of months equal to the amount transferred for less than fair market value divided by the average monthly cost to a private patient of nursing facility services in the state is applied.
Exceptions, such as where an individual makes a transfer to a spouse or for a purpose other than to qualify for Medicaid, do apply. In the absence of an exception, however, the penalty period applies.
Specifically - there’s an exemption against estate recovery if such recovery would work an “undue hardship” on the surviving family members. For instance - business assets would be exempt if that is a working business and a forced sale would throw surviving family members out of work.
But you woudl need to claim that exemption specifically 0 and most likely woudl need a local attorney helping you.
That affects all items owned by the Medicaid recipient.