The creditors may be able to go after the house, but probably wouldn’t for that amount of debt. Most likely if you explain the situation, they’ll back off and, as you say, issue a 1099 for the value of the waived debt. I’m afraid that any steps you might take to avoid the debt could cause other issues for you, such as a higher tax should you sell the house. We’d recommend that you consult with a local elder law attorney to be certain of the best approach. For one thing, it’s probably important to be certain that you and your mother own the house as joint tenants and not as tenants in common.
Harry S. Margolis practices elder law, estate, and special needs planning in Boston and Wellesley, Massachusetts. He is the founder of ElderLawAnswers.com and answers consumer questions about estate planning issues here and at AskHarry.info.