All Forum Posts by: Clay Lingg

Again I don't want to step on any toes with MS's interpretation, however the federal rules are clear that the penalty is assessed for any amount (i.e. penalty would apply for sale at 75% of appraisal)  on a sale or gift of assets.  I hope that helps and best of luck! 

Sorry apparently Biggerpockets doesn't allow me to put the firm website into a posting. Understandable. Regardless you can Google search for me in Hanover, Pennsylvania to confirm I'm legitimate. 

You're making a few assumptions that I would caution against. Please note I'm an elder law attorney in Pennsylvania, (feel free to google my firm to confirm - and each state's interpretations of the federal rules are different. With that in mind, there's no obligation to sell the house at the appraised value or greater. The federal Medicaid rules, interpreted by each state differently, says that a property sold for less than fair market value (appraised value) will cause a penalty for the seller/nursing home patient. Therefore so long as the seller as sufficient funds from the sale he/she can sell the property for much less, typically 50% of the appraised value, leaving sufficient equity for you to wholesale with a profit and sell to a buyer at a discount. 

As to your questions:

1. Yes, I handle these transactions from the seller side routinely. It's just rare to find a seller who doesn't want to keep 1/2 the value of the property for their children or other beneficiaries. 

2. You can do  a seller-financed deal, but you'll end up paying close to full appraised value. The purchase must be carefully structured if you are going to buy at a discount.

3. You are better discussing with an elder law attorney in your state since Medicaid offices cannot provide legal advice.

Please feel free to send me a message if you want more specifics. 

Sorry for being unoriginal but I answered a similar question recently so I copied and pasted from a prior post. 

"I've counseled clients in the exact same situation in Pennsylvania on the proper steps to comply with the 5 year look-back penalty under Medicaid rules using a gifting and Medicaid compliant annuity strategy. Doing so would allow you to purchase the property for half the value without causing an issue with Medicaid, without stopping payment to the nursing facility, and avoiding a filial support claim against the daughter for reimbursement. Feel free to send me a message if you want more details. Good luck!"

The seller's son is somewhat accurate regarding Medicaid Estate Recovery but you can avoid that by selling the property prior to the owner's passing. You would be purchasing the property outright for 45-50% of the value. The range is dependent on the owner's income and other available assets. You would use the equity gift as your downpayment with the property. How you pay the seller is what makes the process work. Feel free to send me a message. 

Contact an elder law attorney in the seller's state. I've counseled clients in the exact same situation in Pennsylvania on the proper steps to comply with the 5 year look-back penalty under Medicaid rules using a gifting and Medicaid compliant annuity strategy. Doing so would allow you to purchase the property for half the value without causing an issue with Medicaid, without stopping payment to the nursing facility, and avoiding a filial support claim against the daughter for reimbursement.  Feel free to send me a message if you want more details. Good luck!

Typically the institutionalized individual's power of attorney will sell the property. The nursing home only forces the person with authority to sell the property. The nursing home is just looking for payment from the institutionalized person or Medicaid. Look to the social workers at nursing homes for potential referral resources

This can be a great opportunity to buy the home for 50% off if the sellers' POA is primarily interested in ensuring their parents care is paid for. If that's the case I highly suggest you speak with an elder law attorney for a win win situation regarding gifting and qualifying for long term care. If you're interested in discussing in more detail, then feel free to send me a DM.

This is great stuff Chris! I presumed this was an insolvent intestate estate with no beneficiaries, which was likely far reaching on my part. I agree that the failure to pay the inheritance tax would allow Department of Revenue to go after based on the lien, but I'm not certain I would jump to the conclusion that the taxes would be owed at all if there are no beneficiaries present. I would appreciate your thoughts!

Attorney from Adams and York county, occasionally passing through Franklin county. Just wanted to relieve your concerns on paying inheritance tax. You're not a beneficiary of an estate so no inheritance tax due. Similar to a person buying the diamond ring from the estate, the buyer doesn't owe inheritance tax.

My recommendation is only limited to the single family home because of the unique advantage the sellers situation provides for you. I'll preface this with saying that I'm an attorney in Pennsylvania, so you ought to get legal counsel to confirm this in Indiana. Now onto the analysis, assuming for the sake of conversation and, simple math, that the SFR is valued currently at $100,000. Furthermore we'll assume that the seller's primary goal is to make sure that the seller's time in the nursing home is paid and care continues.

Approach the seller with the proposition that you can purchase the home while ensuring that the seller can still receive Medicaid benefits. How? By purchasing the property for $50,000.00, Medicaid will take issue with the transaction since it is $50,000 less than the fair market value of $100,000.00. However, instead of simply giving the seller $50,000, you follow this advice and put that money into a Medicaid Complaint Annuity. I don't sell these but typically go through Krause Financial Services. Why all the extra work? By purchasing the property at half price, you already have $50,000 in equity in the property, making a loan from a bank much easier for the remaining $50,000 purchase price. Furthermore, by putting the seller's $50,000 into a Medicaid complaint annuity that pays for 5 months ($50,000 gift of equity divided by the average cost of a nursing home $10,000 = 5 months), you can ensure that as soon as the annuity runs out, the individual is eligible for Medicaid, which we addressed earlier is the seller's primary goal. 

Depending on the appraised value of the property, the seller's income, and prior gifts, purchasing a property for 45%-50% of the value leaves significant margin in the event there are family members who may want a piece of the proceeds from the sale. If you do approach an attorney then you can summarize this by asking about half-loaf gifting. Hope this helps!