Co-Borrowing and Medicaid Benefits

            Before committing to homeownership between parents and children, be aware that Medicaid qualification can be jeopardized when parents sign on a new mortgage. Buying a home with an elderly parent might make sense if you're sure they don't or won't qualify for Medicaid, or if they have more than enough money set aside for unexpected long-term care needs. If your elderly parent may need Medicaid later in life, it's important to research what impact homeownership may have on future assistance. Rules vary from state to state, but there are situations in which a parent's home can be taken by the Medicaid estate recovery program. If your parent's name is on the deed and he or she goes into long-term care, you may lose part of your investment or your parent may lose their Medicaid benefits. The U.S. Department of Health and Human Services reports that "once the home is sold, its equity interest, based on the property's fair market value and net sale proceeds, becomes a countable asset. In a similar fashion, the home of an institutionalized Medicaid recipient loses its exempt status once he or she no longer intends to return home, and the homeowner's equity interest becomes a countable asset." This risk should be weighed against the potential benefits of homeownership between parents and children, and the situation can be discussed with a knowledgeable real estate lawyer.

             When buying a home for a parent, you need to weigh the advantages of buying it as an income property against those of buying it as a second home. The former may be easier to finance, but the latter offers tax advantages that may help you manage the cost of housing a parent. No matter how you finance your elders' new residence, providing a home for your parents can be a practical move as well as a lasting gesture of gratitude to the people who once housed you. Source--Market Insider-Insider Tips