By Quentin Fottrell
My father gifted his house to his four children too late to be able to qualify for Medicaid (it was inside the 3-year window) and pay for his nursing home. Three of my siblings took a HELOC to pay his bills and keep the house. I did not have the same desire.
I paid off my quarter of it, some $6,000. At the request of my oldest brother and executor, when my dad passed away, I also signed over a $10,000 life insurance payout, which only siblings received. I presume the policy was taken before my younger two siblings were born.
I have little to no interest in using the house: I am not enamored with the area. The house requires repair and upkeep, as none of us live in it full time. The oldest brother is now sending out the “budget” for next year’s upkeep, roughly $2,000 apiece.
One sibling cannot pay anything, as he is broke. I retired this year, and I did not budget for keeping up that property. I have used it only once in two years, but I am clearly expected to keep paying upkeep on my late father’s home.
I pay my share of the property taxes and the remainder of the HELOC that the third sibling is too broke to pay, but I wish there were some way to get out of these expectations without simply giving up my share for nothing. I believe that I cannot sell my quarter, as it is joint ownership.
I don’t see any good way out without engendering permanent loss of family goodwill. Do I have any good legal options—other than simply giving my share away?
Daughter & Sibling
This is not an uncommon dilemma: failing to meet the look-back period on Medicaid (more on that later) and the dispute among siblings of varying means who are trying to collectively manage a family home or vacation home left to them by their parents.
You could either sign over your share, ask your financially stable siblings to buy you out, or sell the property, but you need their permission to do the latter. You would have to instigate a forced sale of the property—a partition lawsuit where the property is sold under court supervision.
In such a lawsuit, all of your siblings would be given the opportunity to show if/how they contribute to the property’s upkeep, HELOC fees and property taxes. It may be that you take this action and, seeing the writing on the wall, your siblings agree to sell.
The best time to make a decision on this was, of course, when your father was making a decision to gift the home to you. You don’t give the value of the home, but if you felt it would lead to untenable expenses, or discord among your siblings, you could have refused.
A partition action would obviously do just that—create ill-will among your brothers and sisters, perhaps especially for that sibling who cannot afford to contribute financially. If you sit down with your siblings in the same room (or Zoom /zigman2/quotes/211319643/composite ZM +4.31% it may be that you can all see eye-to-eye.
“In some states, the owner who wants out can sell his or her interest to a third party, usually a speculator, who will then file a partition action to force a below market sale of the property,” says Neil V. Carbone, trusts and estates partner at Farrell Fritz PC .
“At least 20 states, including New York, have adopted the Uniform Partition of Heirs Property Act to protect against these sales to third parties,” he adds. “Under this act, the court must determine the value of the property and give the co-owners the opportunity to buy out those requesting the forced sale.”
The problem with inheritance, as in life, is that people often only see a situation from their point of view. If you explain how and why holding on to this property is difficult for you, you may be able to come to a peaceful resolution, even if that means reneging on your share.
It’s a cautionary tale. Nearly 40% of older Americans will have “moderate needs” for long-term care, while almost a quarter will have “minimal needs” for such services, according to the Center for Retirement Research whose researchers crunched two decades worth of data .
For others reading this: Recovery rules vary by state, and Medicaid is generally the last resort for long-term care. As your family discovered, a Medicaid recipient must spend down their assets and resources, and may only maintain their home within certain limits on its value.
The look-back rules also vary by state. There is a penalty period if, say, a house has been sold within too short of time of the prospective Medicaid recipient entering long-term care because the proceeds from your father’s house could have been used for his care.
“The date of one’s Medicaid application is the date from which one’s look-back period begins,” the American Council of Aging says. “In 49 states and D.C., the look back period is 60 months. In California, the look back period is 30 months.”
“As an example, if a Florida resident applies for Medicaid on Jan. 1, 2022, their look-back period extends back 60 months to Dec. 31, 2016,” the nonprofit organization adds. “All financial transactions during that time frame will be subject to review.”
The look-back doesn’t just apply to real estate. It also includes “money gifted to a granddaughter for her high school graduation, a house transferred to a nephew, collectors’ coins sold for half their value, or a vehicle donated to a local charity,” the ACA says.
“Even payments made to a personal care assistant without a formal care agreement or assets that were gifted, transferred, or sold under fair market value by a non-applicant spouse can violate the look-back period and result in a period of Medicaid ineligibility,” it adds.
Carbone sees a lot of cases such as yours. “Parents may be overly idealistic in expecting that their children will cooperate with each other in dealing with inherited real property,” he says. “Unfortunately, inherited real property often becomes a source of family infighting.”
“When a vacation home is involved, all the joy and good memories that were associated with the family refuge can quickly be replaced with anger and frustration that tears the family apart,” he adds.
Your family has wandered into an area that has been occupied by many families before you: Medicaid rules and family properties. It may feel stressful to deal with this now, but rest assured that you are not the first person to deal with this situation, and you won’t be the last.
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