When Rose’s husband died three years ago, she decided it was finally time to get her affairs in order. She wanted to keep things simple, so her plan was to deed her home and farm to her four children. She knew she wanted to keep her family out of probate court when she died, and she figured getting her property out of her name was a good way to do that. As a side benefit, she saw this as a good way to keep her property safe if she needed nursing home care. Her husband went into a nursing home for a few short weeks of rehab before his death, so they didn’t end up spending much on his care. But the experience opened her eyes to what can happen if you face long-term care expenses without a plan.
Unfortunately for Rose’s family, her “simple plan” caused as many problems as it solved. As it turned out, Rose never needed nursing home care. Her daughter, Daisy, on the other hand, did reside in a nursing home, and her diagnosis predicted that she might spend several years there.
Daisy was not wealthy. When I met her court-appointed guardian, Daisy had about $50,000 to her name. Because the nursing home was running about $6,000 per month, her guardian was seeking advice on what to do when Daisy was out of money. She thought the nursing home would automatically transition Daisy to Medicaid when her funds ran out.
I broke the bad news that Daisy would not qualify for Medicaid, even if she was flat broke, because of the partial interest she owned in her mother’s home and farm. The family had never thought about that. They were desperate to save their mother’s property, but they also wanted to make sure that Daisy was taken care of. Was there any way to do both?
There was, but it wouldn’t be quick or easy. We needed to get Daisy’s name off the deeds to her mother’s property. Because Daisy was under a court-appointed guardianship, the guardian had to have the judge’s approval to sign any deeds on Daisy’s behalf, and there was no guarantee that the judge would agree. Assuming the judge would sign off, relinquishing Daisy’s interest in the property would create a Medicaid gifting penalty, and we could only hope that she’d have enough funds to cover the nursing home costs throughout the resulting waiting period. The process would be very expensive and time consuming.
Everyone wants to keep their plan as simple as possible, but Rose kept things too simple. Deeding your property to your children is rarely the best way to go, sometimes for the reason Rose’s family learned the hard way and sometimes for a whole host of other reasons. My team would love to help you find a better way to plan for your family’s best future. Give us a call to set up a no-cost strategy session.
