Recently, I received a call from a local couple, Bill (85 years old) and Mary (83 years old) who have had a rough couple of years. In 2013, Bill was diagnosed with Parkinsons and in 2014, Mary was diagnosed with early stage Alzheimer’s Disease. As if that wasn’t difficult enough, their daughter, Annie, was involved in a tragic car accident in July 2014 and lost her life at age 51. Annie was survived by two wonderful children, 24 year old Alex and 21 year old Robin.

After the accident and consumed by grief, the family wasn’t thinking too clearly and they sold the house that Annie owned at the time of her death.  The children, believing they were doing the responsible thing, used the proceeds from the sale to pay off their student loans. They were broken-hearted when they sold the house. Miraculously, the buyer has been transferred to another city and now needs to sell the house. Bill, Mary, Alex and Robin are very excited because they have a chance to purchase the home. The problem is that Alex and Robin don’t have the money to buy it and, because they are so young and without a credit history, may not be able to obtain financing. Grandpa and Grandma do have the funds, but because of their medical problems they are very concerned about making any gift at this time. They wanted to know if there was any way they could help Alex and Robin buy the house and not penalize themselves if they need skilled nursing care in the next 60 months.

I reviewed the couple’s assets in order to determine the best course of action:

Bill and Mary’s Assets

Residence:                                                                                                                  $ 175,000.00
Car:                                                                                                                              $  20,000.00
Checking Account                                                                                                     $  25,000.00
Savings Account                                                                                                        $   47,500.00
Investment Account                                                                                                 $   75,000.00
Retirement Account (Bill)                                                                                      $   55,000.00
Retirement Account (Mary)                                                                                   $   25,000.00

Total                                                                                                                             $ 382,500.00

Our recommendations:

Because of their present medical conditions, I advised Bill and Mary that any transfers they made as gifts would likely be penalized if either one of them needed skilled nursing care in the next 60 months. After reviewing their situation, I told them that they had $57,500 in excess resources that would have to spent down before one of them would be eligible for skilled nursing home care.

I suggested that instead of gifting the money to the grandchildren, that they use the $57,500 to purchase an interest in Annie’s house as joint tenants with right of survivorship with Alex and Robin. Because Alex and Robin do not have established credit, although they both have good jobs, Bill and Mary can guarantee the mortgage that Alex and Robin take out on the house.

The joint ownership will place a legal impediment on the transfer of the house, so it will not be available as a resource if they need skilled nursing care in the future.  And, because it is joint tenancy with right of survivorship, when Bill and Mary die, their interest will pass automatically to Alex and Robin.  With this arrangement, even if Bill and Mary were in a nursing home and received Medicaid benefits, there would be no lien on the house.

With some good planning, Bill and Mary were able to accomplish their goals without jeopardizing other assets and, at the same time, assuring a source of payments for their care if one of them needs skilled nursing care in the future.