If my parents pay for an addition to my home, is it part of my estate, or theirs?

A fellow caregiver asked...

My uncle and my mother were owners of my grandparents' home. My mother and father sold me their half for a $1.00 3 years ago, and I have lived on this property now for 5 years. My uncle just decided to gift/sell me his half as well for $1.00,(he lives there too, and still lives there now). He sought a real-estate lawyer and the lawyer did a title examination and it's clear. Now my name and husband's name are both on the deed. Are we full owners of this property?

Now this is were it gets sticky. My parents are elderly and my dad has Parkinson's disease and would like to put an in-laws addition on this property, which is fine and welcome as my husband and I would help my mom in caring for them both. They are using their funds to pay for this addition, so my question is this: after both parents are deceased, is this addition considered part of my parents' estate? Or do I legally own the addition since the home is now in my name?

Also I am confused about Medicaid liens...what if for some reason or another my uncle needs nursing home care and needs Medicaid help down the road...can Medicaid put a lien on the property he gifted to us? And same for my parents - can Medicaid put a lien on the addition too if in fact down the road my parents (either one) need nursing home care? My uncle did not retain a life estate on the property either. However, I hope my uncle can remain in residence until his death and I would try to my best take care of him as well. I am a bit confused.

Expert Answer

Steve Weisman hosts the nationally syndicated radio show A Touch of Grey, heard on more than 50 stations, including WABC in New York City and KRLA in Los Angeles. He is a practicing lawyer specializing in estate planning and is admitted to practice before the United States Supreme Court. He's a public speaker and commentator who has appeared on many radio and television shows throughout the country, and he's the legal editor of Talkers magazine, the preeminent trade publication of talk radio. His latest book is The Truth About Avoiding Scams.

The transfer by your mother and your uncle of their interests in the home are considered by the laws to be gifts to you rather than a sale even though the deed may recite that the consideration for the transfer is the payment of a dollar. This is an important distinctiion in regard to Medicaid.

Now that you own the home, if your parents were to pay for an addition to the home, they would in fact be making another gift to you. However, what you may be able to do is to sell them a life estate interest in the home in return for the cost of building the addition. If they were to live in the addition for at least one year before one or both went into a nursing home, Medicaid would not be able to seek reimbursement from the home.

In regard to your uncle, Medicaid is not able to put a lien on your home because they can only put a lien on property in which he has an interest and he has already given you his entire interest in the property. However, if he were to go into a nursing home within five years of having made the gift of his interest in the home to you, the value of the interest in the home that he gave to you would be considered a disqualifying gift and he would have a penalty period begin before he would be eligible for Medicaid once he had to go to a nursing home. However, you may be able to establish a caretaker agreement whereby you are paid for taking care of him in your home. If you had done this at the time he transferred his interest in the home to you, you might have been able to have the transfer of his interest qualify not as a gift, but as a sale in return for your future services. I urge you to contact an elder law attorney to help you in this matter. Medicaid differs somewhat from state to state and it is important for you to have someone familiar with your state's laws.