Multi-generational Living can be a lifesaver, but keep good records

Recent new reports show an uptick in the construction of “oversized” houses designed to accommodate three generations of a family. The aging or disabled parents may move in with their middle-aged child, and then the working child in their 20’s may move in as well to have a more affordable living arrangement. For the generation who are aging or have disabilities, who may need to apply for benefits such as Medicaid at some point, careful planning is vital, along with thorough record-keeping.

Should the time come that it is necessary to arrange for long-term care — whether in the home or out — it may be necessary to apply for Medicaid to pay for it, since health insurance and Medicare do not provide such benefits. The Medicaid application will require 5 years of financial records. The reason for this “five year look-back” is that the program must determine whether the applicant was making uncompensated transfers to anyone else during the prior 5 years. An application may be denied if it appears that there were such gifts. An arrangement that was done for the overall good of the extended family may be viewed as gifting by the Medicaid agency, so great care is needed to avoid that problem down the road. Here are a few things to think about:

Who pays the mortgage? If the applicant wasn’t the owner of the home, or was just a part owner, but paid 100% of the mortgage and taxes and insurance, this might be construed as a gift to the other occupants.

How is property titled? If the applicant owns a life estate and the child owns the remainder interest, appropriate contributions by the child in lieu of rent should be worked out to avoid a risk that waiver of rent is treated as an uncompensated transfer.

Is there a joint household operating account? Keep careful records to show that the contributions made by the applicant were spent pro rata on the applicant’s costs of occupancy.

Careful planning can avoid a crisis, and working out these details in a well-documented way can prevent problems with Medicaid eligibility down the road.


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