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I'm not sure if it's different for every state, but where I live, you can buy your parent's house for "fair market value", and be fine, but if your parents want to transfer the deed to your name, with an exchange of say 10 dollars, and they would have living rights, it would have to be in 'your' name for five years, otherwise, if either of them would have ti go to a NH, the state can still take the property.
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I would check with an elder law attorney.. I am not an expert on these matters, but have had experience with my own parent's home when Dad moved to a nursing facility.

Do you plan for either parent to be on Medicaid when they move to a nursing facility? Do you plan to put the home in their name? Again, I cannot give you advice or tips w/o consulting an attorney in your parent's city, state. They can give you proper advice.
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Your question can not be answered on-line. I would say in short, if you have enough money to buy your parents house then you have enough money to speak with an "Elder Lawyer" do not go to a local lawyer. Things to consider are:
Health of parent, other assets, Set up values, capital gains, LTC, 5 year look back, medicaid penalties, child caregiver rules.
Instead of spending your money maybe consider looking at putting the house in a trust outside of the estate.
You goal should be to protect the home from creditors and to not loose any of their or your tax advantages. If you purchased the house it could be a legal asset for any of you or your families creditors, could be split in divorce, or if you are sued it would be considered a asset. So therefore your parents could be at risk of being legally removed from your house you now own! Look I could go on here, but you really need to sit down and speak with an elder attorney. I am not an attorney but I am a financial adviser for the last 25 years. And have made it my job to research the best way to transfer wealth to the next generation. All I can say it depends on your individual goals and each situation is a little different.

The home is removed from the parent’s name and, if done 5 years or more before needing long term care, will be outside the Medicaid lookback, that time frame within which Medicaid looks to confirm that you have in fact spent all your money and haven’t given it away. At the same time, the trust can be set up in such a way that the assets it holds will be part of Mom's estate and she will be able to take advantage of both the capital gains tax exclusion and the step up in basis that I discussed in my last post.

Financial Advisers accomplish the best of both worlds. The home can be protected and tax advantages will not be lost. But, there are even more potential benefits. Since the home is not in the child’s name but in the trust, it is not subject to the child’s creditors, or to being split with the child’s spouse in a divorce. Additionally, if Mom needs care within 5 years of the transfer, the home can be sold or borrowed against to help pay the cost of care. In other words, some of the asset can be used for care but not all of it need be consumed.
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Pam, you don't have to do anything, the house is a protected asset as far as Medicaid is concerned. The car is also protected...
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The answer will be state specific as different states have different rules (most, for instance, do not recognize the "enhanced life estate deed" and some do not provide homestead property tax exemptions for property held in trust).

The house as an exempt asset with respect to Medicaid qualification has nothing to do with disposition of the property at the demise of the Medicaid recipient.

What state are you in?
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What MICROVIEW mentioned is very much aligned with how Medicaid qualification works here in the state of NJ. When my grandfather needed to go into a LTC facility and to qualify for Medicaid, because both his and my grandmother's names were on the deed so the house was "protected" and not factored into the parameters for his qualification . But in order for him to qualify, all of their assets as a whole had to be reduced. It was an excruciating process. My grandfather passed away 2 months after qualifying for Medicaid (took a total of 6 months of checking and verifying every single penny spent on their bank statements). My grandmother was diagnosed with Alzheimers shortly after my grandfather was placed in the LTC facility; July 2008 and as of last week is in the moderate to severe classification and seemingly on a fast decline. We had moved the house into a Trust never imagining she would decline this quickly and thought she would definitely clear the 5 year look back when it came time for her to need LTC and Medicaid. I am now preparing to meet with her attorney to see what our options are as she will need LTC a lot sooner than expected and cannot afford pay out of pocket and will not qualify for Medicaid unless we can sell this house in a market where no one is buying.
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Depending on what state your parent is in, the life estate may be considered a resource for Medicaid purposes, and they would be eligible. My mother's Medicaid caseworker had suggested to me that I buy our home (I was living in it) on land contract. Then the law changed and land contracts were considered resources. She was not eligible. I then had to take out a mortgage to buy the home, and use the money to pay for her caregivers until she became resource-eligible for Medicaid. Please find out what is considered a Medicaid resource in your state, and consult an attorney knowledgeable with Medicaid and nursing homes. And make sure the attorney the attorney is up-to-date with current Medicaid rules. They can change quarterly or more in my state.
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What State you live in DOES make a huge difference in partially trying to even answer this question. I was told "oh of course your mother can keep her house" but when she passes, they take THEIR Share of money from her care if you get medicaid. Overall, sell or buy their home and hope they dont need care for 5 years, or in your case, you need to use the house money for the care until its gone. If you get anything out of these replies, please DOCUMENT everything you spend of your parent's, and keep all receipts , and bank statements (if you dont do it online).
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