What happens to parent's house if they go into a nursing home?

[AJDupree]

I need some info from someone knowledgable about Michigan processes
when it comes to nursing homes, Medicaid, Quit-claim deeds, and wills.

Here's the situation. My dad died in February without a will. Due to
our state's intestate laws, this was not a problem, however. There's
just me and my mom, and the house was in both of their names, as was
the car, so she just had to get the titles of each changed after
providing Death Certificates, etc. After that happened, and then a
recent stroke that my mom's sister-in-law had in July, my mom started
thinking that she needs a Will or something, to make sure that I get
the house when she dies.

So inbetween the time she made the appt with the probate attorney and
the actual date of the appointment, my mom asked a bunch of her friends
what she should do, and I swear every single one of them told her to
have my name added to the title of the house. Additionally, one week
after my dad died, my husband and I went to see his mother in a nursing
home, and the first thing out of her mouth to me was "you and your mom
need to get your name added to the house so the State doesn't take it
if your mom has to go into a nursing home someday."

After researching that - Quit Claim Deeds basically - I decided that I
did NOT want my name added to her house. Due to tax purposes for me,
plus the probate attorney advised us during our initial meeting with
him, that my mom would then lose some seniors-related tax credit or
something (I think having to do with the property taxes on the house)
come income tax time. Anyway, we decided upon a simple Will, since my
mom's estate would not be real large or complicated. After considering
between a trust and a will, the attorney said that I'd end up paying
about the same in probate costs to settle the Will, as she would have
to pay to set up and maintain a Trust, since the state of Michigan
overhauled the probate process a few years ago and it's much simpler
and cheaper than it used to be, especially for simple estates like my
mom's. So my mom had him draw up a Will, along with Powers of Attorney
for me for both financial and medical purposes.

Well, the other night my mother-in-law called my mom and asked her what
ended up happening with that. When my mom told her she had a Will made
up, leaving the house to me, my MIL told her "oh no, you don't want
that - the lawyer will get all the money, and it'll have to go thru
probate court. You need to add her name to the title so you don't lose
the house if you have to go into a home." So now my mom is all worried
and upset that she should add my name to the house. I told my husband
to tell his mom the butt out, because every time she or someone else
plants a seed of doubt in my mom's mind, she will worry it to death.
She'll end up in the freaking hospital or nursing home for sure if she
gives herself a **** heart attack worrying about the advice that
everyone is giving her!

So, in the state of Michigan, what exactly would happen if my mom, God
forbid, had to be put into a nursing home tomorrow? The house is paid
for and in her name only. She has a Will leaving it to me upon her
death. Right now, Michigan is NOT going after people's estates for
Medicaid recovery. It's being talked about, but right now they are not
and I have heard they probably won't because that would really piss off
a huge constituent of voters - the senior citizens who only want to
pass off their modest homes to their children when they die.

I do know that even if she DID add my name to the house today, the
State can look back 5 years for stuff like that, if she were apply for
Medicaid for nursing home purposes. '

But as it stands now, if she had to go into a nursing home and apply
for Medicaid, I assume she would first have to spend down any money she
has (she can have $2000 cash in savings, however). Which would mean she
would have to spend down most of the life insurance proceeds (approx.
$18K left) that she received when my dad died. But once that money was
gone, since the house is paid for and in her name, what would happen
with that? Would she be able to go to the nursing home on Medicaid,
and have her house sit empty (except when we would go up north and we
could stay there during those times - we live 2 hours away) until she
died, at which time the Will would be in effect and the house could
pass to me via the inheritance? Or would the state make my mom sell
the house before any Medicaid kicked in?

[Andy]

I do know that even if she DID add my name to the house today, the
State can look back 5 years for stuff like that, if she were apply for
Medicaid for nursing home purposes. '


Reply:

The Elder Law sites reccomend things like have your mom
"quit claim the house to you and retain a life estate for your
mother".
Have the new deed registered immediately, and use a local
elder law proficient attorney to make sure you have the bases covered.

NOTHING will shelter the house from Medicaid eligibility
until after a certain number of years have passed, which is
state dependent.

NOTHING will shelter the house from federal tax implications
at your mother's death.

NOTHING will shelter the house against present debts, (unless
she sells the house and loses the money in Las Vegas...... and can
prove it, or the IRS will assume she gave the money to you)

However, this method will bypass probate. At your mom's death,
you can sell the house immediately , getting a clear title by
showing the death certificate to the local tax district, who has
the house registered as a quit claim with yourself as grantee..

The house is then "inherited property" as far as federal tax is
concerned,
and you get the full step up in basis. The federal estate tax must
be
paid by her estate, but unless the estate is really big, no fed return
needs
to be filed..... If estate tax is due, the IRS will come after the
house
proceeds if there isn't enough left in the estate to pay it. Unless
the
estate is over a couple million (I forget exactly) , don't worry about
it
until about 2010, when the laws expire....

If you try to sell the house, or realize any profit from it, before
your
mother's death, the rules change, and you may get screwed....

You really need a local attorney that is proficient in elder law.
Use the internet to find one. Attorneys do not normally admit that
they are not knowledgeable about anything, so don't use your
neighbor's.......

I've been thru this in Florida, and that is how it works there.

[rick++]

AJDupree writes:

So, in the state of Michigan, what exactly would happen if my mom, Godforbid, had to be put into a nursing home tomorrow?

In Michigan the "lookback" period for asset transfers to relatives is
36 months and 60 months for trusts. That means if there was not
fair market value payment for the asset the Michigan either
delays eligibility for medicaid until the end of the lookback period
or sells the asset. There are lots of exclusions listed in the website
particularly protecting surviving spouses.
http://courts.co.calhoun.mi.us/book013.htm
(There is a pending bill in US Congress to uniformitize the lookback
to 60 monthsfor the entire country.)