Dear Mr. Premack: My mother signed and recorded a warranty deed which gifted her lifetime home to me two years after my dad’s passing (he died about four years ago and they left 14 surviving children). My father died without a will. My mother does not have a will and I doubt she would sign one now. She is 82, almost incapacitated though it has not been medically stated, and has signs of Alzheimer’s. If she has to move to a nursing home, can MERP still take her home to recover Medicaid expenses considering she deeded the house over two years ago? Is the deed she signed enough to allow me to legally sell the house before she dies, so we’ll avoid losing it to the state? Can we (the children) put her in a nursing home? She will be ticked off when I sell it but all 14 children concur that she is better in a nursing home! – LC
Your parents likely purchased this home during their marriage, so it would have been classified under Texas law as community property. If any of the 14 children were his from a prior marriage, then when he died intestate his children split his half and your mother kept her half. If all 14 children are from this marriage, then when your father died intestate, his share of the house passed to your mother. To prove she owns it, she should have seen a lawyer for help with some type of legal process under the Texas Probate Code.
Let’s assume she inherited the house and took care of the legalities before she signed and recorded that warranty deed gifting the house solely to you. The gift to you was a terrible decision from a legal perspective, for several reasons:
First, gifting the house to you was potentially a taxable gift. At the least she should have filed a gift tax return with the IRS to claim her exemption from the gift tax; at worst, she may owe taxes to the IRS because of the gift.
Second, gifting the house caused her to lose her exemptions from local property taxes. She had a school tax freeze, a 65+ exemption and a homestead exemption. She lost them all when she gifted the house to you. Even if the local appraisal district has not yet noticed the change, when it finds out it can come after you for all of the new, increased back taxes owed because of the gift.
Third, gifting the house caused her to lose control of her destiny. You own the house now and you can legally sell it. As you say, “she will be ticked off when I sell”. Of course she will; she did not gift the house to you thinking you would sell it out from under her.
Fourth, gifting the house totally interferes with her ability to get assistance from Medicaid. You ask if she can lose the house to MERP, but the real question is “can she even qualify for Medicaid benefits?” Gifting the house causes a disqualification period to be imposed. Assume the house is worth $75,000. When she needs help paying for a nursing home and applies for Medicaid, they would impose a 479 day penalty during which Medicaid will refuse to pay for her care. The house is not at risk because she does not own it, but where will she (or you) get money to pay privately for her nursing home (which may cost $80,000 or more) during the disqualification period?
If neither you, your mother nor your siblings like those results then you need to work together to repair the damage. Your mother needs to consult with a certified elder law attorney who is an expert at handling Medicaid issues, if she is capable of taking action. The repair process could include 1) you signing a deed returning ownership of the home to your mother, 2) working with a doctor to determine her needs regarding supervision, and seeking appropriate care for her in her home for as long as possible, and 3) your mother signing a new “enhanced life estate deed” to protect the house from a MERP claim if she does have to apply for Medicaid in the future. Losing the house to the state should be the last of your concerns. You need to focus on respecting your mother, assisting her to maintain her independence as long as possible, and keeping peace in your family. If Medicaid looms as a necessity, seek qualified legal advice so that the harm done by the current gift deed will not be repeated.
Paul Premack is a Certified Elder Law Attorney and a Five Star Wealth Manager (Texas Monthly Magazine 2009-2013) practicing estate planning and probate law in San Antonio.
Original Publication: San Antonio Express News, October 21, 2013