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My MIL wants to do this for 2 main reasons:

1) To hopefully not lose her house if she goes into a nursing home for a lengthy amount of time

Makes sense to me. Much better for me to pay her expenses rather than her paying them. I have no idea what her medical and financial circumstances are, but there is a Medicaid look-back period. If she needed Medicaid, a/k/a welfare, assistance before then her daughters would have to fork over its value.

2) So my wife and SIL hopefully won't have to pay inheritence taxes at the time of her death.

Unless she lives in one of the few states that have an inheritance tax, if she has enough assets to worry about estate tax she should have long ago seen an estate planning lawyer. Since there are so few estates subject to estate tax nowadays, it's more likely that she's bought into all of the political BS about the "death tax."

She wants to do whatever she can to limit the amount of "her money" the government can get from her in either of these cases.

Well, at least she's going to see a lawyer, which is a start. From our "true story" files comes the saga of a friend of mine. In order to save money by not bothering with lawyers, wills and such, his parents just put him on the deed to the house for an $8 filing fee. Such a bargain. Fast forward to her widowhood and my friend's bankruptcy. He qualified for a liquidating bankruptcy, which would have meant she'd lose her home. So he went with a chapter 13 and 3 years of payments he wouldn't have had to make in a chapter 7.

Rule Your Retirement Home Fool
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