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My mother-in-law lives in a house that she purchased several years ago with her mother (Gran). MIL recently had the deed to the house transferred to her name only, since Gran's mental state has be deteriorating significantly over the past year and MIL is getting to the point where she can no longer care for her. (The deed transfer was done to ensure Gran's eligibility for Medicaid, since Gran's only asset was her stake in the house).

Aside from the fact that this may not have been necessary (I think a primary residence is excluded from Medicaid asset consideration), what sort of tax consequences will my MIL incur as a result of the deed transfer? The house was purchased about 8 years ago for about $98k and is probably worth about $150k today. To my knowledge, they had no formal document drawn up stating what percentage of the house each of them owned.

Taxes are the least of her problems. Since this is your m-i-l, my suggestion is the following statement: "Honey, your mother needs to bundle this mess up and see a real estate lawyer. Yesterday. Tell her, and be sure to give her my love."

Phil Marti
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