Is it better to receive a housing addition gift?
This is a multi-faceted question, the answer to which depends upon many factors that are not readily apparent as presented.
The primary issue is the combination of the health of your in-laws and their wishes as to how much control they wish over their assets.
If they are concerned about the possibility of having to go into a nursing home in the future, a gift of assets to their children will help protect those assets if they do not require Medicaid assistance for nursing home costs for another five years. If they have long term care insurance, Medicaid may be less of a concern. Otherwise their assets would not be sufficient to pay for long term care without Medicaid assistance.
They can make gifts to your wife of as much money as they wish without any gift tax liability. Everyone has a lifetime million dollar exemption from gift taxes so they can give as much as they wish at this time without having to pay any gift tax.
Another option that they have is to buy a partial interest or a life estate interest in your home. This would have income tax ramifications to you and your wife, but would protect their funds even if they required Medicaid within five years so long as they lived in your home for one year.
Ultimately, they and you should discuss your options with an elder law attorney. However, there are reasonable compatible options for all of you.
Given the in-laws' ages, this could be a very long term arrangement. (think 25 years or more.) After the arrangement about paying for the addition, consider that there should be a lease that tells responsabilities for expenses, maintenance and repairs, as well as the normal tenant things, Verbal arrangements are honestly made, but memories fade, especially with age, and -- just get it in writing, jou'll be glad you did.
