Justin, I’ve heard it’s a good idea to transfer my house to my kids now to protect it in case I need long-term care. Is that true? – Robert
Robert, This is a common question, and while transferring your home to your kids might seem like a good way to protect it, there are serious risks and better alternatives to consider.
Here’s why transferring your home might not be the best idea:
- Medicaid Penalties: If you transfer your home and apply for Medicaid within five years, the transfer could result in a penalty period during which Medicaid won’t cover your long-term care costs. This is known as the “look-back period.”
- Loss of Control: Once you transfer ownership, you no longer legally own the home. If your relationship with your children changes or they face financial problems like bankruptcy or divorce, your home could be at risk.
- Tax Consequences: Transferring your home outright can create significant tax issues for your children. If they sell the home later, they may owe large capital gains taxes based on your original purchase price instead of its value at the time of your death.
There are safer ways to protect your home while maintaining control and avoiding unnecessary risks:
- Beneficiary Deed: A beneficiary deed allows you to name your children as beneficiaries of your home upon your death, keeping it out of probate and protecting it from Medicaid liens.
- Irrevocable Trust: By placing your home in an irrevocable trust, you can protect it from long-term care costs while maintaining some control over how it’s used or transferred. This strategy also avoids probate and may help with Medicaid eligibility.
Robert, transferring your home outright is rarely the best option. By working with an elder law attorney, you can explore these alternatives to protect your home and achieve your goals without unnecessary risks.
If you’d like to discuss these options further, my firm would be happy to help. Visit our website, ElrodFirm.com, to learn more or call us to schedule a no-charge strategy session.