Clients often ask whether they should give their house to their children - now, for Medicaid qualification purposes, or as part of their estate plan. My responses to these questions are "probably not" and "maybe." ("Maybe", you will appreciate, is always a safe answer.)
If you give your house to your children so that the Medicaid authorities will not be able to place a lien on it if you receive Medicaid benefits, you will still have to deal with the five-year "lookback" provision. Gifts made within five years are counted as disqualifying transfers for Medicaid purposes.
Long-term care insurance is expensive at older ages but it will protect your house from a Medicaid lien and it will save your other assets. Medicaid requirements are tough, and in the future it is likely that they will become tougher. We recommend that clients buy long-term care insurance whenever possible. If the cost is too great for clients, perhaps their children can share the cost.
Parents like to think of leaving their houses to their children. A Cape house brings up memories of pleasant summer days when the children were young. Leaving the house to the children now may not work out so well.
Common ownership of a vacation house requires a great deal of cooperation. Expenses have to be shared and times for occupancy have to be allocated.
One child may live in Newton, and another child may live in Seattle, and is able to use the house only once or twice during the year. If there are more than two or three children, working out agreements is even more difficult.
If a child wants to pass the interest in the house to his or her children, that compounds the issues of sharing expenses and allocation of times for occupancy. The solution may be an agreement that, upon the death of a child, the others will buy his or her share in the house. The high cost of real estate may make the buy-out impossible and require that the property be sold to a third party.
If you want to leave your house to your children, talk to us about working out an agreement between your children. This may avoid problems later.*
