How would I transfer property to my children but still collect rental income from it?
Full Question:
Answer:
Before you qualify for the government nursing home assistance program, there is a 60 month look back to see if and when you transferred your assets for less than fair cash value or you transferred your assets into a trust system or any system of transferring your wealth for the purpose of becoming eligible for the nursing home program depriving the state of all your available resources for your long-term health care.
Transferring, giving away or selling resources for less than fair market value is called a "disposal of resources". Under the Deficit Reduction act of 2005, the look back period (five years rather than three) will apply to transfers made on or after February 8, 2006. For every $4300 disposed of you will be disqualified for one month of Medical Assistance coverage of your nursing home care.
The penalty period for transfers made on or after February 8, 2006, starts on the later of: the first day of the month after which assets are transferred for less than fair market value, or the date on which you are eligible for Medical Assistance—Long Term Care. The change from 3 years to 5 will be phased in so that, for example, if you apply for Medical Assistance in March, 2009, the look-back period will be three years and one month. As of February, 2011, the full look-back period of five years will be fully in effect. If you give away property or money on more than one occasion, the second penalty does not begin to run until the end of the first one. The length of the disqualification depends on the value of the resources transferred.
Transferring a house to the following people does not affect eligibility for Medicaid:
-A spouse
-A child under the age of twenty-one or a child who is certified blind or certified disabled at any age
-A sibling with an equity interest in the home who has resided in the home at least one year immediately prior to the date the patient became institutionalized and continues to lawfully reside in the home
-A caretaker child who has resided in the home for at least two years immediately prior to the date the patient became institutionalized and who provided care.
If a person's equity interest in the home is $500,000 or less (or $750,000 or less in some cases) and the person intends on returning home, it will not be considered as a resource in determining eligibility for Medicaid. The equity value is derived by subtracting encumbrances such as liens and mortgages from the fair market value. Reverse mortgages and home equity loans can be used to reduce the equity interest.
Creating a life estate without the power to sell the house is a disposal of a resource that may disqualify you from Medical Assistance. If a life estate deed without the power to sell was created long enough ago that there is no penalty, the house is a countable resource, but your life estate without the power to sell has a market value of $0, so it would not disqualify you from Medical Assistance. The purchase of a life estate will be included in the definition of "assets" unless the purchaser resides in the home for at least one year after the date of purchase.
Creating a life estate deed with the power to sell the house is not a disposal, because you still have the power to sell the house at any time without anyone else's permission. However, the house could not be an exempt resource based only on your saying you intend to return home, because the State cannot put a lien on a house owned this way. The market value of the house would be counted as an available resource. If the house would be exempt for other reasons, such as because your spouse or a dependent relative lives in it, then it still would be exempt.
A deed is the written document which transfers title (ownership) or an interest in real property to another person. The deed must describe the real property, name the party transferring the property (grantor), the party receiving the property (grantee) and be signed and notarized by the grantor. In addition to the signature of the grantor(s), deeds must be acknowledged to be recorded and acceptable as evidence of ownership without other proof. A valid deed must be delivered and accepted to be an effective conveyance. Most states assume delivery if the grantee is in possession of the deed. The deed also must be accepted by the grantee. This acceptance does not need to be shown in any formal way, but rather may be by any act, conduct or words showing an intention to accept such as recording the deed. To complete the transfer (conveyance) the deed must be recorded in the office of the county recorder or recorder of deeds in the county in which the real estate is located.
There are many situations in which it may be desirable to add or delete a person's name from a deed, such as adding or removing a spouse, child or sibling. A person can only be deleted from a deed with their approval, i.e., they must execute the deed (sign and have their signature notarized).
There are two basic types of deeds: a warranty deed, which guarantees that the grantor owns title, and the quitclaim deed, which transfers only that interest in the real property which the grantor actually has. The only type of deed that creates "liability by reason of covenants of warranty" as to matters of record is a general warranty deed. A quit claim deed contains no warranties and the seller doesn't have liability to the buyer for other recorded claims on the property. The purchaser takes the property subject to existing taxes, assessments, liens, encumbrances, covenants, conditions, restrictions, rights of way and easements of record. However, a person who obtains a mortgage is still liable for mortgage payments after executing a quit claim deed on the property securing the mortgage. The quitclaim is often used among family members or from one joint owner to the other when there is little question about existing ownership, or just to clear the title.
When a person owes money under a rental agreement, a breach of contract action may be brought in court. Contracts are agreements that are legally enforceable. A contract is an agreement between two parties that creates an obligation to do or refrain from doing a particular thing. The purpose of a contract is to establish the terms of the agreement by which the parties have fixed their rights and duties. An oral contract is an agreement made with spoken words and either no writing or only partially written. An oral contract may generally be enforced the same as a written agreement. However, it is much more difficult with an oral contract to prove its existence or the terms. Oral contracts also usually have a shorter time period within which a person seeking to enforce their contract right must sue. A written contract generally provides a longer time to sue than for breach of an oral contract. Contracts are mainly governed by state statutory and common (judge-made) law and private law. Private law generally refers to the terms of the agreement between the parties, as parties have freedom to override many state law requirements regarding formalities of contracts. Each state has developed its own common law of contracts, which consists of a body of jurisprudence developed over time by trial and appellate courts on a case-by-case basis.
contract arises when at least one party's performance does not live up to the terms of the contract and causes the other party to suffer economic damage or other types of measurable injury. A lawsuit for breach of contract is a civil action and the remedies awarded are designed to place the injured party in the position they would be in if not for the breach. Remedies for contractual breaches are not designed to punish the breaching party. The five basic remedies for breach of contract include the following: money damages, restitution, rescission, reformation, and specific performance. A money damage award includes a sum of money that is given as compensation for financial losses caused by a breach of contract. Parties injured by a breach are entitled to the benefit of the bargain they entered, or the net gain that would have accrued but for the breach. The type of breach governs the extent of damages that may be recovered.
Restitution is a remedy designed to restore the injured party to the position occupied prior to the formation of the contract. Parties seeking restitution may not request to be compensated for lost profits or other earnings caused by a breach. Instead, restitution aims at returning to the plaintiff any money or property given to the defendant under the contract. Plaintiffs typically seek restitution when contracts they have entered are voided by courts due to a defendant's incompetence or incapacity.
A judgment lien can be filed if an actual judgment in a lawsuit is obtained from a court. Such cases include failure to pay a debt, including credit cards, bank loans, or deficiency judgments on repossessed vehicles. In some circumstances, judgments can be enforced by sale of property until the amount due is satisfied. A plaintiff who obtains a monetary judgment is termed a "judgment creditor." The defendant becomes a "judgment debtor." secure payment of the claim to the injured party. After the judgment creditor places a lien upon the attached property, the next step in the collection process is to conduct a sale of the attached property to satisfy the judgment debt.
