I received a phone call yesterday morning from Amy*. Amy was referred to me by A Place For Mom, a company that helps families find senior housing. Amy holds a Power of Attorney for her elderly mother. Her mother has been living with her for 18 months, and Amy has been trying to get her mother’s house sold so she has the money to pay for health care services. Amy has a full time job, small children, and is trying to take care of her mother, which has become another full time job. Amy is stuck in the sandwich generation until she gets money, or benefits, to help with her mom’s care. Amy just received a denial letter from Medical Assistance, denying benefits to her mother for an unusual reason. Not because her mother didn’t financially qualify, not because her mother didn’t need health care services, but because her mother’s house, which is still listed for sale, is priced below the home’s tax assessed value. (I’ll wait here while you finish shaking your head in disbelief).
This isn’t a new rule. The rule was created so Amy’s mother doesn’t try to sell her home to a friend or family member for $100, and then have the government (Medical Assistance or Medicaid) pay for her healthcare. The rule protects the system and the taxpayers from being ripped off, which is certainly a legitimate concern. (Lately it seems if rules aren’t in place, people get ripped off, i.e. American taxpayers and AIG).
We know that tax assessed values of properties tend to lag behind market values. A few years ago when home prices were selling well above the tax assessed value, we seemed to have forgotten about this rule. Now that it seems more common for homes to sell below the tax assessed value, it has become an issue for many adult children and seniors who are selling homes due to health issues.
So if you are a senior, the adult child of a senior, hold a Power of Attorney for a senior, or are the nominated executor of an estate, here is what you need to know to protect yourself against additional taxes, denial of benefits, or potential property liens:
1) Plan ahead. If there’s even a remote chance the homeowner is going to need some kind of health care in the next several years, make sure you follow these steps.
2) Work with a REALTOR who specializes in working with seniors. They’ll be able to make referrals to professionals that can walk you through this process.
3) Know and work with a good elder law attorney. Not only can they potentially help you protect assets, but also ensure you don't do anything today in the sale of your home that could (i) cause you to pay more taxes (ii) have a lien placed on your home (iii) limit benefits available to your elderly loved one.
4) Build a body of evidence to show you are selling (or at least trying to sell) the home for fair market value.
a. Get at least one (two is better) independent appraisals to document the home’s actual fair market value.
b. When you first put the home on the market, list it at the tax assessed value, then work with your agent to lower the price to the ACTUAL fair market price. This shows that you did try to sell the home at the tax assessed value before lowering it, and that a sale at the tax assessed value simply was not going to happen. (As a REALTOR I don’t like this one, but it is at the suggestion of an elder law attorney** I trust, so naturally I’ll suggest it to my clients.)
5) Keep all of your documentation in a safe place. In addition to keeping a copy yourself, you may have your agent scan your documents, so they’ll be stored electronically for at least 7 years. Real Estate Brokers are required to keep copies of their files for 7 years, and an appraisal and records of tax assessed values and list prices are within the realm of what a broker could keep.
6) If you are in the process for applying for Medical Assistance, and the home is listed for sale below the tax assessed value, be prepared for your application to automatically be denied. The denial can be appealed, however. If you’ve taken the previous steps, you’ve armed yourself with documentation to show you really are trying to get the house sold for a fair price, and not trying to take advantage of the system. This will be extremely beneficial to you during the appeal process.
*Name changed to protect privacy
DISCLAIMER. This information is not to be construed in any way as the author providing legal advice to the reader. Every person’s situation is different and thus the most appropriate legal advice for any particular situation could deviate from this information somewhat. You should consult with a qualified Elder Law attorney if you have any questions about this information.
**Craig P. Goldman is an attorney who concentrates his practice on Elder Law, Estate Planning, Disability Planning, and Probate. He can be reached at the following:
Craig P. Goldman
Messerli & Kramer, P.A.
150 South 5th Street, Suite 1800
Minneapolis, MN 55042
Other Blog Articles