My parents offered me their $380K home for $200K. How to take the free equity without risking being house-poor

Core Insights - The article discusses the trend of younger generations, particularly Gen Z and millennials, acquiring homes from their baby boomer and Gen X parents at discounted prices, providing them with an entry point into the housing market [1][2]. Financial Implications - Kwame, a 23-year-old, is offered to buy his parents' home valued at $380,000 for $200,000, resulting in $180,000 in built-in equity, but he expresses concern about becoming house-poor despite the discount [2]. - The difference between the fair market value and the sale price is considered a gift of equity, which has implications for gift taxes, Medicaid eligibility, and mortgage structuring [3][4]. - The gift exceeds the $19,000 annual gift tax exclusion, necessitating the filing of IRS Form 709, although his parents may not owe taxes unless they exceed their lifetime exemption of $13.99 million in 2025 and $15 million in 2026 [4]. - Capital gains taxes are unlikely on the sale portion, as the gain should fall below the $500,000 exclusion for married taxpayers filing jointly, given the sale price of $200,000 [5]. - Kwame's cost basis in the home will be $200,000, which could lead to larger capital gains if sold later, but he may qualify for an exemption if it remains his primary residence [5]. Medicaid Considerations - The article highlights that Kwame's parents should consider the potential impact of the property transfer on their future Medicaid long-term care eligibility, as there is a five-year look-back period for asset transfers [6][7].