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Lifetime Right of Occupancy/Taxes
The state is: California
I know up front I need to contact a tax accountant or attorney, but I thought someone might be able to help here.
Last year my husband's father became ill and we had to place him in a nursing home. Not knowing our options at the time, we needed to sell his house to help pay the nursing home costs until he was approved for Medicaid/Medical. To help protect the assets, we were advised to have him purchase an interest in our own house for a lifetime right of occupancy (I'm finding this is the same or similar to a life estate). His house was sold (my husband was the durable POA), and the profit from the house was issued as a check to my husband as per the lifetime right of occupancy. His father passed away about 2 months later.
My question is...what is my husband's tax liability on that amount he received from the profit on the sale of his dad's house? This amount of money was supposed to be considered as his father using all his "liquid" assets to purchase a lifetime interest in our own property. We have been loosely told that my husband will be taxed significantly on this amount because it is considered income for him. Is this true? Is there no way to protect that money from being severely taxed? I don't want to sound greedy, but I just don't see how that's fair. Had the house not been sold at that time, the house as per his father's will would have been inherited by my husband anyway.
Any references to lifetime right of occupancy/life estates have been where the interest is in the person's own home. I can't find info anywhere on when the interest has been purchased in someone else's home. Please help!
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