Your Child IS Your Landlord, Pay Them!

Our clients are looking for ways to be able to shift their family assets to the next generation without being lost on the already staggering costs of long term nursing home care. Medicaid and Nursing Home Asset Protection Planning can take many forms.

One of the tools available to parents who are living with their children is the old fashioned lease. Yes, your child can be your landlord. Although your child would willingly and happily take you into their home without payment, this is an opportunity to shift a portion of your assets in a lawful and systematic manner.

First, we have to determine that the parent or parents are living in the home owned by their child. It should be obvious, but the parents cannot pay rent to the child if the parents actually own the home. Once that threshold is established, the lease must be structured in a realistic manner to approximate the fair market rental value of the portion of the home used by the parent or parents. The lease should also take into account the parent(s) share of the utilities to be paid. We take significant time to review these issues with clients to make sure that they will be viewed as acceptable payments when the parent or parents ultimately apply for Medicaid. Properly structured rental agreements will allow these payments to be made to the child without concern of the five year look back period. However, you will have to mindful of the income tax considerations for the child who is receiving the rental payment.