parents are in hospital want a quick deed on home in case they need to go to a nursing facility
3 Answers from Attorneys
Short answer: Don't do it. It will be considered a "divestment" for Medicaid/nursing home purposes and your parents will be disqualified from receiving benefits for a period of time. You can save the house, but you need to see an elder law attorney so it is done the right way.
Elder Law Attorney
This could be the biggest mistake you could make. It will be considered a gift under Medicaid law. If protecting the assets is the goal there are ways a married couple can protect 100% of the assets. I know it sounds too good to be true but it is not. As for the home only a Lady Bird Deed is the answer.
These deeds are more accurately called "enhanced life estate deeds" but got their more colorful moniker (according to unsubstantiated legal lore) because President Johnson once used this type of deed to convey some land to Lady Bird.
"Life estate" is an ownership arrangement for land designed to accomplish two things: 1) it allows the homeowner to retain the use of the home during his/her lifetime, and 2) it transfers title to the home at the time of death without the need for probate.
In a regular life estate deed, the owner keeps the "life estate" and conveys a "remainder interest" to someone who will inherit the property. The current owner continues to occupy and use the property and is entitled to all money that may come from the property. However, the owner cannot sell the property without agreement of and participation by the holder of the remainder interest. Further, the IRS puts a value on the creation of the remainder interest, and if it is large enough there may be gift tax consequences.
A "Lady Bird" enhanced life estate deed adds one feature: the owner keeps the right to sell or give away the land without anyone’s consent or participation. Essentially, the owner has the unilateral right to cancel the remainder interest. As such, there is no taxable gift to be accounted for.
If the arrangements under the Lady Bird deed are not cancelled, then when the owner dies the life estate expires automatically. The remainder interest matures into full, unrestricted ownership. The ownership change happens without probate.
Related Questions & Answers
Is it legal to charge sales tax on a single bottle of soda along with bottle deposit... Asked 6/30/11, 12:36 pm in United States Michigan Elder Law
I live in Michigan. I am part of a limited liability corporation with 2 of my... Asked 1/26/11, 9:09 am in United States Michigan Elder Law
My brother wants me removed as POA for our mother. I received a notice of a hearing... Asked 11/30/10, 3:29 pm in United States Michigan Elder Law
My mom is progressing fast with the symptoms of dementia, I am her oldest son... Asked 11/12/10, 8:30 am in United States Michigan Elder Law
My Mother-in-law has been living with us for 18 years of our 25 years of marriage.... Asked 9/26/10, 8:30 am in United States Michigan Elder Law