Chick Man, tax quershun....

[Big Muddy]

We are in the process of having to possibly move my 87 y.o. m-i-l into a care facility....will she have any tax liability, if she sells her house???

Also, would there be any advantage to her gifting the house to her intended heir's, while she is still living???

[BarryBobPosthole]

Those kinds of things are difficult. I don't envy your task Edward.
BKB

[Big Muddy]

Yep, I went thru all of this with my parents, and now, with my m-i-l.
She's a real gem, and I love her dearly, and want to do what's best for her.

[Chicken Dinner]

BM, first let me say I'm sorry to hear your MIL is failing. That's got to be hard for you and your Mrs. There's probably three different issues to consider and I don't have enough information to be definitive in my answer.* They are Income tax, Estate tax, and, possibly, Medicare issues. If her home qualifies as her principal residence, she can exclude up to $250k in gain on its sale for income tax purposes. (I'm not sure what the State income tax rules are where she lives. But, they typically follow the Federal rules in this area.) So, the answer depends on her basis in the home, its sales price and how long she's lived there, etc. From an Estate tax perspective, it's not usually a good idea to gift a home during your life as, depending on the value of the home, the gift tax could be triggered for the recipients. Also, the value of property passed through inheritance gets a "step-up" in basis to FMV when it passes to her heirs which could avoid/reduce taxes for them when/if they decide to sell it. This answer could change depending on the value of her overall estate. There's actually a way to transfer future ownership via a life estate that could make sense, but is way more complicated than I can get into here. Depending on her situation and who is paying for the nursing home, there could be a bunch of Medicare rules about transferring assets and how much she's required to pitch in. I've just heard there are rules and have never dealt with them personally. There's enough going on here that you might want to consult with a tax or estate planner that has experience locally.

*Circular 230 Disclosure: If you didn't pay for it, it's not tax advice.

[Big Muddy]

Yep, I was just wanting a broad overview, and that's what you gave me....she's got an attorney, but like most lawyers, he's always out golfing or boinking his secretary. ;)

We will get him involved, when the time comes.

Thanks, buddy !!!

[jb]

When we had to place my mother in a assisted living unit, we were told to have her keep her home and to rent it out.
If she sold it, the money would go toward her living expenses until Medicare took over.
Her funds lasted for all but the last year she was there, if we had sold her house nothing would have been left in the estate.
Not sure if this still holds true.
My sister needed more of the estate $$$ than I did, so I let her handle the entire affair.

[BarryBobPosthole]

I think the magic number was $2000 for my Dad. When he went to the Baptist Retirement Center, essentially a nursing home, we had to spend his assets down to $2000 for him to be eligible for Medicare. And then I had to pay over $3000 a month out of my own pocket for almost a year on top of what they claimed was a $900 a month pharmacy bill. This for a man that took two pills three times a day of dilantin and phenolbarbitol. We didn't have to sell his house to be eligible, just have it listed, which I did. When his medicare finally kicked in, not surprisingly, his pharmacy bill went down to almost $100 a month. Those Baptists never met a nickel they didn't like. They treated him well, but it was always so obviously all about the benjamins. I still feel the need to shower even when I drive past that place.

BKB

[Chicken Dinner]

I probably should also have mentioned that if there is more than a house, i.e., a farm or a bunch of land, you may want to mention that to the attorney. It could complicate the $250k exclusion.

[Big Muddy]

Nah, she only owns her home of 30 years and a few bucks....I ain't like Bucky, I married a 'po woman. ;)