Should I Give My Kids the House?

Families often wonder what they should do to protect their home and money if they need care. The truth is the State does not take the assets when someone needs Medicaid. There is a five-year look back where they check what you have (or had), that is true. If there are transfers of assets in that time, then the State can impose a “penalty.” There is no penalty if the transfer was to your spouse. A penalty means you must pay for your own care for a while (up to a maximum of five more years) and then the State will pay. Do not worry, there are ways to protect your hard-earned assets for your spouse and your family if you plan ahead and follow their complicated rules.

One way is to put assets into a trust. This should be done five years before you apply for Medicaid. A trust can avoid capital gains taxes, and does not prevent you from selling the house if needed. It also can avoid the risk of your home having a lien put on it. If the home owner has a catastrophic event in their life such as becoming sick, divorced, sued or even passing away before you, this means some creditor may try to get the house. A trust avoids having any person as owner which is why the risk is avoided. A trust is simply not a person, and cannot get sick, sued, divorced, etc. Not all trusts are created equal so be sure to get advice from an Elder Law Attorney.

If your child, even if they are over 65, was determined disabled through Social Security or is legally blind, Medicaid rules allow you to transfer any and all of your assets to them with no penalty. It is a free gift that allows you to be eligible for Medicaid the day you make the transfers. The assets can only go to your disabled child, there cannot be any other owner. But be careful to check what program(s) this child is on, or the gift may take away their eligibility for the program.

Another way to protect your home and qualify for Medicaid is the caretaker child rule. But the following must be true. You need a level of care that could count for a nursing home, even if you are getting care at home. This must be verified with medical notes from your doctors. Your caretaker child must live with you in your home, so they will have to verify residency at your address. The caretaker child must have been the one providing you with the care for the last two years which your medical records must reflect as well.

Rest assured there are many ways to protect assets, even at the last minute. Paying for long-term care is expensive but there are rules, polices, and planning that are available. See an Elder Law Attorney to advise on the best option for you.

Attorney Halley C. Allaire is principal in the law firm of Allaire Elder Law, a member of the National Academy of Elder Law Attorneys, Inc., with an office at 271 Farmington Avenue, Bristol, (860) 259-1500, or on the web at www.allaireelderlaw.com. If you have a question, send a note to Attorney Halley C. Allaire and your question may be discussed in a future column.