Legal Question in Tax Law in New Jersey

Re: family loans

An actual loan is not treated as income to you for tax purposes.

I assume the next part of your question concerns Medicaid eligability.

If it were a true loan, it would be a countable asset for Medicaid purposes.

If it were treated as a gift (again, no income tax for your purposes) then it would depend on when the gift was made. If a gift were made today and three years passed before your father applied for Medicaid, then the $150,000 would not be counted as his for Medicaid eligability purposes. If he applied within 3 years, he would be subject to some period of Medicaid ineligability.

Re: family loans

A loan or gift is not income. A loan not forgiven as a gift, but unpaid may be considered as income at some point in the future. In any case, a loan is not a legitimate spend down for nursing home liability, and will be considered as an available asset. A gift is likewise not a legitimate spenddown, although in some states the continuation of an annual gift program may so qualify. You need to check the law of your grandfather's state of residence.