Friday, October 19, 2012
Recent changes to the Medicaid eligibility rules have re-defined the term "fair market value." Specifically, the regulations state that a sale BETWEEN RELATIVES is NOT for fair market unless, proved otherwise. The regulations do not define the term "relative," meaning sales between parents, children, grandchildren, cousins, nieces/nephews, etc. could be included.
The result: Any transactions between "relatives" are going to be "red flagged" as a suspicious transaction that may be categorized as a divestment or gift (resulting in penalty). As such, it is imperative that one have MULTIPLE SOURCES of verification that a transaction between family members is for "fair market value." Written statements from realtors and/or appraisers, or a combination of the two, should be sufficient.