My father is currently on Medicare and has a nice pension. Several years ago, he set up a living trust that gives me 100% of his estate after he dies. He was just diagnosed with a major illness. So, it's possible at some point he might have to enter a nursing home, his income and Medicare benefits could be exhausted, and he'll have to apply for Medicaid. I understand Medicaid has a 5 year look back. We're not trying to get around that. What we're trying to avoid is Medicare forcing the sale of the house after he dies. I want to keep and live in my father's house. It's in a beautiful, and now very expensive, housing market. The house has accrued hundreds of thousands of dollars in equity. I'm fine with Medicaid putting a lien on the house and forcing repayment if I sell the property after it's already in my name. But, I have no way of coming up with potentially ten's of thousands of dollars in order to prevent a forced sale before it's in my name.
Assuming they can't force a sale and they put a lien on the house, does that lien accrue interest?
Is it possible to pay the lien with a second mortgage?
One draw back with a Quit Claim Deed is that now the bases of the house will be what your Dad had paid for the house when he bought it. When you sell, you might find yourself faced with Capital Gain Taxes.
If you had inherited the house via a Will/Trust, the bases for the house would be what the house is worth on the day you inherited it. Big difference when it comes to Capital Gains should you sell later down the road.
If you can come up with the cash owed to Medicaid, I can't see why Medicaid would need to touch the house. Again, check with an Elder Law Attorney as State laws could be different.
And if Dad doesn't need Medicaid for five years after you own the house, Medicaid has no interest in it.
But I think the concern might come into play long before Dad dies. If he needs to apply for Medicaid less than five years from the date of the quit claim deed, that will be considered a gift to you. And, it sounds like, a very valuable gift. That will incur a penalty, which is a waiting period until he is eligible to receive Medicaid benefits. The length of the period depends on the amount he has given away in the previous 5 years. It can be many months.
So, Dad has gone through all his assets. He has been paying for his own care but has no more resources to do that. His pension and other income does not cover the monthly cost of his care. He applies for Medicaid. Medicaid says "Since you gave away $x in the past 5 years, you are not eligible for benefits for 17 months." What is Dad going to do while waiting for the benefits to start?
As freqflyer suggests, you really need to consult an attorney who specializes in Elder Law. The specialty is critical. This is not a job for your cousin who practices family law or your best friend's husband who is a corporate lawyer. Dad needs someone who thoroughly knows the ins and outs of the complex Medicaid rules.
Best wishes to you in getting this set up appropriately. After you've consulted an Elder Law attorney, we'd all learn from your report of what you decide to do.