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Purchasing house for mom, how to protect equity?

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My mother is 68 years old, no income and no assets. My brother would like to help her purchase a house with all cash. All living expenses and reasonable medical expenses will be shared between me and my brother. We saw a couple of low income affordable housing units which requires the deed to be in my mother's name. My brother is concerned that if a medical debt arises later on, a lien could be put on the house wiping out all equity. Is there an easy way to purchase the house in cash, put the deed in mom's name and still protect equity?  

One option we are considering ,is for my brother to issue a private mortgage and file a first position lien on the property. The issue here is with IRS would expect interest to be paid on the loan. I am not sure how that will be handled. 

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So what happens when she dies ... Can the property be willed to someone who doesn't qualify ?   Can the house be sold out... (more)

kb2120 (May. 02, 2017 @ 11:24a) |

And if it's willable (ww) will estate have to pay back discount maybe with interest/appreciation.

zapjb (May. 02, 2017 @ 11:46a) |

I don't see this working. OP is basically trying to buy a subsidized housing unit that he doesn't qualify for. You eithe... (more)

rascott (May. 02, 2017 @ 3:10p) |

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Your mom has Medicare, why would she have medical debt

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I would worry most about a situation where she would need long-term nursing home care. She would likely loose the house until medicaid would pay for it. Also, what happens if she remarries, then her new spouse would inherit it and not you if he outlives her.

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rufflesinc said:   Your mom has Medicare, why would she have medical debt
  Medicare doesn't cover all medical costs.

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Wouldn't a trust work here?

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My opinion: any benefit you get from putting the house in her name is erased if and when she needs long term care. For this reason, even though it seems cheaper to buy a house in her name, it's actually cheaper to buy it in your name.

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If you're getting an absolutely great deal on the low income housing option, maybe consider long term care insurance to cover risk and preserve the value of the house.

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Nice of you two but I would forget buying. Pay rent for her for low-income elder residence.

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The last thing I want to do in 10 years when I'm your mother's age is to have to worry about taking care of a house.

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Your hearts are in the right place, but the real world is against you in this. IF your Mom goes from Medicare to Medicaid, the rules in many states would take the house to recover the costs of the help they give her. She would be limited in the amount of assets she may have (law proposal trying to change that may or may not have passed)

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Just pay her rent and such and declare her as a dependent on his tax return. If he's looking for appreciation then just invest what would have been paid for the house into something else, like REIT fund. You can pitch in with the other expenses.

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Is there any reason why you cannot buy the house in your mother's name, and then have her gift it to your brother while retaining a life estate?

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This is not a solution but questions. How much is the savings in the low income affordable housing units vs standard housing? Is this in a safe neighborhood?

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jhburgess said:   Is there any reason why you cannot buy the house in your mother's name, and then have her gift it to your brother while retaining a life estate?
  Because there is generally a 5 year look back period on these types of financial transactions when someone applies for government assistance type programs such as gov paid nursing facilities and Medicaid.

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rufflesinc said:   Your mom has Medicare, why would she have medical debt
  Surely you jest

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lonestarguy said:   I would worry most about a situation where she would need long-term nursing home care. She would likely loose the house until medicaid would pay for it. Also, what happens if she remarries, then her new spouse would inherit it and not you if he outlives her.
  
For this reason alone we are considering the private mortgage option. A first position lien on the full value would protect from possession by a third party.

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ZenNUTS said:   Nice of you two but I would forget buying. Pay rent for her for low-income elder residence.
  Is this separate from HUD subsidized section-8 housing? Over in my state, even the waiting list is closed. Plus my mom would get evicted from any rental. There is some sort of mental imbalance, she shouts and yells on a regular basis.

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kingdoodler said:   The last thing I want to do in 10 years when I'm your mother's age is to have to worry about taking care of a house.
  The houses we are considering are in HOA communities so the exterior will be taken care of. My brother is Handy so will take care of the inside, and we are looking only for 1 bedroom small condo/townhouse. This is not a concern.

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Treffen said:   Just pay her rent and such and declare her as a dependent on his tax return. If he's looking for appreciation then just invest what would have been paid for the house into something else, like REIT fund. You can pitch in with the other expenses.
  Renting is a fairly expensive option with no end in sight. For example, the affordable low income units we are considering costs between 60-90k, comparable rents (at fair market price) are between 1200-1500. Plus concern of eviction due to mental health issues.

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zapjb said:   This is not a solution but questions. How much is the savings in the low income affordable housing units vs standard housing? Is this in a safe neighborhood?
  The affordable unit we are looking is priced at 78k, similar units will go for around 140k. The neighborhoods are great as these are generally embedded in newer developments. There are options to buy non-affordable units in our price range but then neighborhood and quality of the house is not as good.

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can your names appear anywhere? Such as a Joint Tenancy?

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I guess don't understand why you can't purchase it under your or your brother's name and rent it out to her.

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If she would be evicted in a rental situation, wouldn't it be pretty mean to her neighbors to put her in a townhouse/condo? If she can't live by herself in an apartment without being evicted, isn't it time to start looking into long-term care options and not buying property?

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Rubl said:   I guess don't understand why you can't purchase it under your or your brother's name and rent it out to her.
  
I expect it's because the property is available via a subsidized or price-capped affordable housing program, and OP & his brother would not qualify.

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SlimTim said:   
Rubl said:   I guess don't understand why you can't purchase it under your or your brother's name and rent it out to her.
  
I expect it's because the property is available via a subsidized or price-capped affordable housing program, and OP & his brother would not qualify.

  So what happens when she dies ... Can the property be willed to someone who doesn't qualify ?   Can the house be sold outright or does it have to be sold later under the same housing program ?

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kb2120 said:   
SlimTim said:   
Rubl said:   I guess don't understand why you can't purchase it under your or your brother's name and rent it out to her.
  
I expect it's because the property is available via a subsidized or price-capped affordable housing program, and OP & his brother would not qualify.

  So what happens when she dies ... Can the property be willed to someone who doesn't qualify ?   Can the house be sold outright or does it have to be sold later under the same housing program ?

  And if it's willable (ww) will estate have to pay back discount maybe with interest/appreciation.

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I don't see this working. OP is basically trying to buy a subsidized housing unit that he doesn't qualify for. You either give her money to buy the place (check gift taxes), with the risk that you could lose the whole investment. Or you buy a non-subsidized unit for double the price, but you'll eventually get the money back when its sold.

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