Should I Transfer My House To My Kids?

One of the most common questions we get from clients is whether they should transfer their house to their children. The answer to this question is almost always absolutely not! Many people think that transferring their house to someone else will allow them to protect their home from having to be sold in the event that they need to go on Medicaid or receive VA benefits. They believe that getting the house out of their own name will help them qualify for these benefits more easily, and that such a tactic is easier and less expensive than executing and funding estate planning documents. However, there are several reasons why this is never a good idea.

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If you are elderly, it is very likely that you purchased your home thirty, forty, or even fifty years ago. The price you paid for your house at that time was probably much less than its current value. For example, say that you paid $35,000 for your house, and it is now worth $250,000. If you transfer the house to your daughter and she later wants to sell the house, she would have to pay capital gains tax on the difference between the price you paid for the house and the value it had at the time she received it – $215,000. You can see how much this can add up!

In the alternative, if you transfer the house through a will or a trust, your beneficiaries will receive what is called a step-up in basis equal to the value of the house at the time they inherited it rather than the value of the house at the time you purchased it.

 You Could Be Prevented or Disqualified From Receiving Medicaid Benefits.

As you may know, there is a five-year “look-back” period for Medicaid eligibility purposes. This means that, when your Medicaid application is being reviewed, any gifts or “uncompensated transfers” that you have made in the past five years will result in a “penalty period.” In 2018, every $6,422.00 worth of uncompensated transfers that you made in the past five years will result in your Medicaid benefits being withheld for one month. Medicaid will not penalize applicants for transfers that occurred more than five years ago.

If you transfer your home to your children and then require long-term care within five years of the transfer, Medicaid will consider this to be an uncompensated transfer. This type of transfer has the potential to delay your Medicaid benefits and possibly even prevent you from ever qualify for Medicaid.

Debt, Disability, Divorce, or Death

There are a few other reasons why the idea of transferring ownership of a parent’s house to their children is never a good idea. If you transfer your home to your child and they have significant debts, then creditors could inquire as to the assets in their name. If your house is in their name, then creditors could make claims against that property in order to recover the debt owed to them. This could result in your child having to sell your house to satisfy his or her creditors.

Additionally, if your child becomes disabled and requires Medicaid or government benefits of her own, owning your house could prevent her from qualifying for these benefits in the same way that it might prevent you from qualifying for benefits if you need long-term care.

Another potential issue is divorce. If you transfer your home to your child and then they go through a divorce, your house could be considered an asset to be divided or dealt with as part of the property agreement with their former spouse.

Finally, if your child passes away before you do and you have transferred your home to him, then your house could be considered part of his estate and distributed to his heirs instead of yours.

Obviously, none of these outcomes are ideal. If you own a home and you are looking to qualify for Medicaid, VA benefits, or other long-term care benefits, an experienced elder law attorney can work with you to implement strategies that will preserve your assets while allowing you to accomplish your goals and receive the benefits you need.

Kit Kat

Ask Kit Kat – Light Bulbs & Wildlife

Hook Law Center: Kit Kat, what is the connection between the type of light bulbs one uses and the impact on wildlife?

Kit Kat: Well, I must admit when I saw the title of this article I was intrigued. I just never had thought about any connection between the two things, but apparently there is one. The increase in the use of outdoor lighting is having, in some cases, a negative effect on wildlife. Worldwide, there has been a 2.2% increase annually of outdoor areas that are artificially lit. Inexpensive LED lighting is partially responsible. According to Paul Bogard, author of The End of Night, “Every creature on this planet has evolved in bright days and dark nights. None has had the evolutionary time to adapt to the blitzkrieg of artificial light.” Some of the harmful side effects of artificial light are: 1) baby turtles heading toward lit-up hotels instead of seeking the sea guided by moonlight, 2) migrating birds disoriented by spotlights, 3) salamanders sleeping later, 4) moths stopping mating, 5) delayed maturation of soybean plants near sodium lighting, and  many more  according to experts.

What can be done to reduce this stress on ecosystems? Well, awareness is the first step. If one didn’t know there was a problem, then there could never be a solution. So, this is what the experts tells us: 1) turn off outdoor lighting when it is not being used, 2) install motion-detector lighting which only comes on when an object is approaching, 3) generally, LED lights are better than other types, but not in all cases. It depends on what creatures are native to an area, and how they interact with the particular type of lighting, and 4) close your curtains or blinds at night to eliminate glare which may be affecting the animal world. There are a surprising amount of them who are nocturnal—30% of vertebrates and 60% of invertebrates. They thrive in the dark, so let’s help keep it that way for them as much as we can. (Nancy Lawson, “Going to the dark side,” All Animals, May/June 2018, p. 38-39)

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