Should I transfer my home to my children?
Well, it depends. It depends on:
- Your unique family, health, and financial situation
- Tax consequences
- If you will need to apply for Medicaid benefits
In the event you need long-term care, there is a five year look-back period that applies to gifts (transfers of assets). If you are faced with a chronic or catastrophic illness within five years after you transfer the home to your children, such a transfer may impact your ability to obtain Medicaid (Title 19) benefits.
Gifting and transferring assets is a very complicated area of the law and requires careful consideration.
If you find out that it makes sense to transfer a home to your children, there are several ways to structure the transfer.
1. Make an outright gift to your children. This is generally not advisable for tax reasons and asset protection purposes.
2. Complete the transfer but retain a life estate. While generally superior to an outright gift, this is also not without problems. However, the retained life estate does give you some legal control over the property and also preserves some tax benefits associated with inherited property versus gifted property.
3. Transfer your home to an irrevocable trust. This is usually the preferred method of protecting the home as it balances tax benefits with asset protection issues and also protects the home from your children's creditors or in the event they should predecease you.
As you can see, the transfer of your home is something that requires careful consideration and sound legal counsel.
Contact us to learn if a home transfer would benefit you.