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How do rental income producing properties work?

 

 

“So one of the other techniques that we often use in Medicaid planning is something called rental income producing property. Rental income producing property is permitted by Medicaid. So lets say, for example, you have $100,000 in extra assets over and above that $2,000 limit. Medicaid allows you to take that $100,000 and invest it in rental income producing property. Now, that can be an apartment. There are actually some organizations that exist in Florida that will take your $100,000 and put you into a part-shareholder investment, like in an apartment building, that sort of thing. But we can get that $100,000 invested in rental income producing property and get you qualified for Medicaid.

Now, why would you want to do that, if all of your income goes to Medicaid? Which it does; pretty much all your income is going to go to Medicaid. But then we use the strategy of enhanced life estate deeding. So you take that $100,000, you put it into rental income producing property, and then you have an enhanced life estate deed on that rental income producing property. So that $100,000 that you bought a little house with, that is providing income to you, the income goes to Medicaid after you pay for the maintenance on that property, so you get to pay for the maintenance and repairs. But then, when you die, because it is in an enhanced life estate deed, it does not go through probate. It passes on your date of death to your named beneficiaries on that deed. So it is going to immediately pass to your children, and you have been able to provide them with a $100,000 gift upon your death. You have actually have been able to leave an asset to your kids, that you otherwise would have had to spend down to get qualified for Medicaid.

So Medicaid is happy, because they got the rental income that helps offset their cost. Your family is happy, because you have been able to provide them with something upon your death. You are happy, because you have been able to provide them with something upon your death that you worked so hard your whole life to save up this $100,000. So it really works for everybody. But, unless you do the Medicaid planning and understand that some of these options are available to you, you could end up just spending down that $100,000 instead of having it provide benefit, not just to your family, but also to Medicaid themselves.”

 

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