personal finance

‘I Take Care of My Aging Parents. How Can I Recover Financially?’

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I moved in with my parents in Massachusetts in 2020, when I got laid off from my job and it became clear that they needed live-in help. Without me, they’d need to be in a nursing home. My dad has dementia, and my mom is on oxygen. It seems likely that she has dementia now too. For the past several winters, at least one of them has gotten sick and wound up in the ICU. There’s going to be a winter when one of them doesn’t come home.

Because my parents require full-time care, I haven’t gotten a new job and I don’t have any income. I’m behind on my student-loan payments and my taxes. My credit score used to be in the 700s, but now it’s terrible — in the 500s. I’m thinking of filing for bankruptcy, but it’s unclear how much that would actually help with these issues.

My parents do not have a will or an estate plan, and at this point, I doubt they are well enough to make one. I want to care for them as long as I can, but I also need to start to consider what this will mean for my finances long term. My main hope is that I heard about a Massachusetts law that says if you’ve lived with your parents for two or more years and you can prove that you’ve lost wages to care for them and that they would have gone into a nursing home without you, the government will let you have their house when they pass away. I think that would apply to me. I have siblings who might fight me for the house, but my parents did not make another plan for it so this is the only way I see it being protected from being taken over by the state to pay for my parents’ medical bills after they’re gone.

From a tax-assessment standpoint, the house is evaluated at about $500,000, and my parents owe only $70,000 on the mortgage. Someone with a similar house nearby but on a much smaller lot just sold their property for $800,000. So if I were to take over the home and sell it as is, I could probably get over a million for it. Another option is that I could set up the property as a group home for people with intellectual disabilities or create a program for people who have been incarcerated and need housing. Then I could earn an income from the property and keep my little apartment in the back. That would be the dream.

Of course, all of this is contingent on whether I would be able to inherit the house from my parents in the first place through the provision I heard about. Is this possible? What would I need to do to set it up?

First of all, I’m sorry you’ve been sucked into the vortex of our country’s dearth of elder care. It’s a black hole that no one deserves, least of all a well-meaning adult who is trying to do what’s best for her ailing parents without completely screwing herself over in the process. Oh, you stayed out of the paid workforce to nurse your mom and dad through their twilight years in the home they know and love? Good for you, here’s your bankruptcy paperwork!

Seriously, though, you deserve better. So let’s start with the good news: The Massachusetts law you mentioned is, in fact, real. (Let’s take a moment to appreciate this tiny state that offers what is arguably the most comprehensive health- and elder-care system in the country.) Anyway, there’s a provision baked into MassHealth law (known as the “child caretaker exemption”) that would enable you to take over the deed on your parents’ home if you’ve been living there to care for them for over two years. When I spoke to Matthew Karr, an attorney who works with the Massachusetts Heritage Law Center, he said it sounds as though you meet the criteria for this.

Another upside to transferring your parents’ home to your name, as you noted, is that it protects the home from being seized by the state to recoup any Medicaid costs your parents incur (as many elderly people do) before they pass away. In other words, the government can’t go after the home because it’s already yours. This would not be the case if your parents died and the house’s value were divided between you and your siblings in probate court, which is what would happen if you did nothing. In that scenario, the state would take its cut first.

To apply for this exemption, Karr says you need three pieces of supporting documentation. “First, you need your birth certificates to prove your relationship to your parents,” he says. “Second, you need two years of tax returns to show that you have resided at the address of their home. And third, you need a doctor’s letter listing out the care you have provided to your parents, basically attesting to the fact that they would have otherwise needed to be in a nursing facility.” You should probably start gathering these now.

Unfortunately, things get tricky in the next step. To apply to transfer the deed of your parents’ property to your name, you would have to be in the process of putting your parents into a nursing home, explains Karr. The reasons for this are complex, but the law was designed partly to help caregivers in your position — those living with their parents and caring for them at home — who might otherwise lose their housing when their parents move into a full-time health facility. (Transferring assets out of their name also helps your parents become eligible for Medicaid-funded facilities.) So ironically, to gain ownership of your parents’ home, you would no longer be able to care for them there.

There is an additional provision that could enable you to inherit the home outright when your parents pass away if you are already living there and have acted as their caregiver for two years. But since you have siblings in the mix, it’s probably not a great idea to bank on it unless they get onboard, Karr says.

Speaking of your siblings: You mentioned that they will fight you for the house, but it’s unclear whether you have broached the topic with them. It may be worth giving them the benefit of the doubt and explaining your logic behind this plan, which seems wholly reasonable to me. And be open to hearing their side, too — if you are willing to listen to their concerns and ideas (surely there are things they want), then you’ll have a much better chance of finding a compromise. Don’t rush or push. These types of conversations take time.

Another potential snag is that your parents are no longer of sound mind to make legal decisions. “An important step is making sure you have power of attorney to act legally on your parents’ behalf,” says Thomas McKinnon, an attorney with the Cushing & Dolan estate-planning firm based in Massachusetts. Alternatively, you will need to go through the court system to establish guardianship and conservatorship.

Not to rub it in, but this is yet another good reason for everyone to encourage their parents to make a will and/or an estate plan. It’s never too soon, but it’s often too late! Since your father has dementia, he can no longer make legal decisions for himself. But if your mom is still mentally capable, I strongly recommend you set up a meeting with her and an estate planner, even if it’s just to give you power of attorney over her affairs going forward.

For more legal assistance regarding your parents, McKinnon recommends reaching out to your local Aging Services Access Point, which may be able to help with affordable legal help. He also advises contacting SHINE, a Massachusetts program that assists with navigating the state’s health-care system (and, by proxy, the child caretaker exemption). In addition, you should think about how your parents’ home will be taxed. If the deed is transferred to you and then you sell it, you could face high capital-gains taxes, though there are some exemptions for which you could be eligible; again, you should seek specific legal guidance from someone who specializes in estate law.

Finally, I want to address your options for bankruptcy. You can find a more comprehensive guide to that process here, but you should also consult a bankruptcy lawyer before you take any next steps. The National Association of Consumer Bankruptcy Attorneys is a good place to find one, and its website offers more free resources and information.

In the long run, I hope you’re able to emerge from this chapter in your life with financial stability — which you certainly deserve. I also hope our legal system evolves to be easier on caregivers in the future (goodness knows, we will need it!). Best of luck.

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‘I Care For My Aging Parents. Can I Financially Recover?’