Hidden Cost to Sell Leisure World Property

Lawyers who assist clients with Medicaid planning sometimes work with clients to sell their real property in an interfamily transaction. One example of this is where a family member wishes to provide a disabled parent with liquid funds to enable the parent to continue to live at home with in-home caregivers. While doing so may delay the parent’s need to move to a nursing home, such a move may become necessary if the parent’s liquid funds are exhausted.

Few children of disabled parents have the wherewithal to simply give their parents large sums of money. That being the case, a child of the disabled parent may provide liquid funds to the disabled parent in exchange for the parent’s real property. In essence, the child buys the parent’s home, and allows the parent to live in the home and use the funds the child paid to buy the property to pay for in home care givers.

Then, once the parent dies or runs out of liquid funds and goes into a nursing home, the child can sell the parent’s home (which the child purchased and now owns) to recover the funds the child paid to her disabled parent to facilitate the parent staying home with a care giver.

Moreover, because the Medicaid rules allow for various methods of determining fair market value, a transaction such as the one described above may be part of an asset preservation strategy with the added benefit that the disabled parent gets to stay at home for a longer period of time than otherwise would be the case.

When considering any such plan, however, one has to take into account hidden costs. An example of a hidden cost is provided by the Leisure World homeowner association. Leisure World is a large senior community in Montgomery County, Maryland. When a homeowner sells a property in Leisure World, the homeowners association requires that a buyer contribute to the “resale improvement fund” an amount equal to 3% of the gross sales price.

For the sale of a $300,000 condo in Leisure World, this charge would amount to $9,000.

It is wise to be aware of any hidden charges that might come to bear when doing Medicaid planning that involves an interfamily real estate transaction.