A friend of mine had to move his mother into a nursing home. He wants to sell her house but is afraid all of the money from selling it would go straight to the government. Does anyone know any ways around this or could someone point us in the right direction? Thanks in advance.
Depending on circumstances, gain of up to $250,000/$500,000 can be excluded under IRC §121. Was it ever used as a rental property? Did she own and use it for at least two out of the past five years? Roughly how much gain are we talking about?
Reference
Internal Revenue Service Publication 523 - Selling Your Home
@Eddie L. Thanks for the reply. It is only a $35K property. After talking to a CPA it looks like more of a medicaid issue. Any money made from the sale will have to go to the nursing home and medicaid will cease until those funds are depleted.
@Eddie L. Thanks for the reply. It is only a $35K property. After talking to a CPA it looks like more of a medicaid issue. Any money made from the sale will have to go to the nursing home and medicaid will cease until those funds are depleted.
Another way to protect one’s home from MERP is via the sibling exemption or the child caregiver exception. These exceptions allow ownership of the home to be transferred by a living Medicaid beneficiary without violating Medicaid’s look back rule and causing Medicaid ineligibility. The sibling exemption allows the transfer of a Medicaid applicant’s home to a sibling. The brother or sister must have equity interest in the home and lived there for a minimum of one year immediately preceding institutionalization (i.e., nursing home care) of the Medicaid applicant. The child caregiver exception allows a Medicaid applicant to transfer their home to their healthy adult child. To fulfill the requirements of this exception, the child must have lived in their parent’s home for at least two years prior to the Medicaid applicant’s institutionalization. Furthermore, the child must have provided a level of care during this timeframe that prevented the aging parent from requiring nursing home care.
Investor · Las Vegas, NV · Member since 2013 · 8k+ posts · 10k+ votes
4y
It sounds like many skipped over your detailed post. Since she’s already going, since it’s a cheaper property, I think most/all that money is going to Medicare. You could sell it at a reasonable discount to a family friend or charity and avoid realtor fees. If the nursing home is like many that $35k will be done within a year, maybe less. The “good news” is she’s in just as good a position as if she had a $100k or maybe even $200k property.