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Will paying family to help with house sale affect Medicaid?

My aunt just went to a nursing home. She has about a year of private pay before she will have to apply for Medicaid. We have to clean out her house and prepare it to be sold which is going to be a lot of time and work on our part since she has lived there for over 50 years and has accumulated a lot of things (nothing very valuable). She would like to give us money to do this since it is her house and most likely we will not be receiving any money from the sale of the house. Is this a legitimate way for her to spend down some of her money? If so, how much money would be considered a reasonable amount and not be flagged if and when she applies for Medicaid?
Status: Open    May 02, 2015 - 11:14 AM


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Expert Answers

Jul 08, 2015 - 09:34 AM

If it is a service for value, such as cleaning out the house, it is a valid spenddown. However, she must pay you at fair market value. Try to get a handyman estimate and use that as backup to show you are being paid at fair market value for your work cleaning out the house. Also if she is paying you, you must declare it as income on your taxes, otherwise when Medicaid will challenge it as a gift. Afterall if it was not a gift, why didnt you declare it as income?

Oct 12, 2015 - 03:27 PM

I’d keep time records of what you do and pay family members no more than you would pay an outside person.

Oct 12, 2015 - 03:30 PM

Your aunt can compensate family members for services rendered provided that she does not pay more than fair market value for those services. Get a proposal from a neutral third party and use that rate.

Oct 13, 2015 - 07:12 PM

You should definately seek the assistance of an estate planning or elder care attorney. There are ways to protect the money for her benefit and her be qualified for Medicaid. Another strategy would be to get an apprasial in as is condition - full of 50 years worth of accumulations and no repairs. If that price comes in at $50,000 and the house in cleaned condition would be worth $100,000 a family member could purchase at the as is price, do the cleaning/moving and sell at a profit.
Payments to family will always generate more attention from Medicaid. Be sure to document the work with photos, time sheets, dump or landfill fees if any, expenses for supplies, etc. Also, get estimates from businesses if possible. Document the labor rate if possible.
Please be sure to see an attorney to assist you with this. The attorney fees can be paid from her funds or the sale of the house. It will be money well spent.

Oct 15, 2015 - 09:02 AM

It may be advisable that your mother not sell her home, as it is an exempt asset. You should speak with an Elder Law attorney to see if there is a way to protect the home from a Medicaid lien at your mother's death. Even if a lien for Medicaid recovery is placed on the house at your mother's death, you may gain considerable leverage over selling the house and spending down until Medicaid qualification.
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