We often are asked, “Should we give our home to the children?” The impetus for the question almost always is a fear that the home will need to be sold to pay for nursing home costs. If that were to happen, what would be left for the children? As with many legal questions, the answer is an annoying “it depends”. Usually the answer is no, but sometimes it is yes.
Here are 7 factors that need to be considered:
- If one spouse is in a nursing home but the other spouse still lives at home, the home is an exempt asset for Medicaid (Title 19) eligibility purposes. If you give the home to your children it loses its exempt status.
- In most instances, a gift of the home to your children will trigger the 5 year Medicaid look back rule before the gift is a protected gift.
- A gift of the home is a taxable gift that has gift tax reporting requirements; in most instances no gift tax is payable, but a gift tax return is required.
- A gift of the home to your children can lead to the loss of the capital gains exclusion if it is sold while you are alive and a loss of the step up in basis when the home is sold after your death.
- A gift of the home to your children can cause you to lose any elderly tax exemption or veteran’s tax exemption you may be receiving.
- If your home is owned by your children, it is available to their creditors, passes through a child’s Will if a child dies before you, and is a marital asset if a child’s marriage breaks down.
- Despite the risks, if gifting the home to your children turns out to be the right thing to do for you, there are different ways to make the gift, some of which can bypass the pitfalls created by an outright gift to children.
For advice specific to you or your family, please contact the office. We would be glad to meet with you for a no hassle, no charge initial consultation, no matter how long it lasts.