Is deeding my senior home to a family member a good idea?

by the Editor, SeniorInsider | Jun 01, 2011

When it comes to senior home retirement planning issues, most of the elderly want to pass their assets on to their children or heirs. They also want to be able to skirt the legal fees and delays they feel are inherent in probate. Senior home issues can get very complex, and may end up causing family issues when one family member gets upset that you chose another to deed your home to.

Why Deeding Your Senior Home to a Family Member May Not Be a Good Idea


Most senior financial planners feel that transferring your home’s title to a family member, usually in the interest of protecting the senior home estate from Medicaid claims, may not be the best financial move you could make. It’s not particularly uncommon for seniors to transfer the title to their property to a child or grandchild in the interest of ensuring the house is left to their heirs rather than sold for end-of-life medical expenses or nursing home costs. The question is whether this a smart move for the senior home owner.

First of all, you will be subject to the intense emotional impact of such a senior home transaction. Most elderly people who deed their senior home to a family member may first feel grief and anguish. After all, you have just lost your control over your home, the property you have probably spent a lifetime paying for, taking care of and feeling safe and secure in. For many seniors, the loss of a home, even if they technically still live there, can be intensely upsetting.

Secondly, there is the issue of trust. What if you have a falling out with the person you have deeded your senior home to? You may find out too late that you have no legal power to re-distribute ownership of your home unless the person you deeded it to is in full agreement.  The family member you deed your home to may also suffer the drawback of significant tax implications, as they automatically take on your tax basis.

The idea that you are protecting your home from Medicaid claims may not be particularly valid, in any case. Although it is true that Medicaid can place a lien on a beneficiary’s home in order to recover benefits paid, transfers of your home are subject to a three-year “look-back” period, meaning you would have had to transfer your home to a family member several years  prior to your senior assistance Medicaid needs.

Best Tips for Passing Your Senior Home to Your Children or Heirs


If you have considered all aspects of passing your senior home to your children now, prior to your death, then you should strongly consider including a “special power of appointment” clause in your deed. Such a clause will ensure that you retain some control over the person who will ultimately own your home. This clause not only protects your home from Medicaid liens, but will kick-start the three-year Medicaid look-back period, eliminating all possible capital gains tax problems for the person you deed the home to.

Keep in mind that the language used in such a clause must be precise and legal if you want to make sure that all benefits are properly met. The special power of appointment clause gives the senior home owner the ability to retain their rights of transfer during their lifetime, or through their will, after death. Medicaid considers this type of transfer a “complete” transfer. However, for tax purposes it is considered incomplete as it retains your right to change your mind. If you’ve made up your mind definitely to transfer your home to a family member, it’s a good idea to consult an elder-law attorney, and make sure you have a special power of appointment clause firmly in place with the transfer.

 

Topics

Testimonials

  • My father had to move out of the retirement community he was living in. I didn’t know what to do. I found a new one in the same city with an opening the very same day on SeniorInsider.com. Thanks!

    Doug J

    California

  • I was in need of resources for caregivers and stumbled on your site. You answered a lot of the questions I had about taking care of my aging mother. What a wealth of knowledge, all in one place.

    Lisa Z

    Florida

  • I saved so much time thanks to your valuable resources on this site. We need more resources like yours on the Internet. I'll be sure to refer anyone who is looking for senior related information to you.

    Jeana M

    Washington

  • I was having a tough time understanding all the legal issues (probate, trusts, living wills, etc.) until I found SeniorInsider.com. You put everything into terms that I can easily understand.

    John R

    Delaware

Connect With Us

If you’d like to receive FREE information on a range of topics of interest to seniors, fill out the form below:

Please send me:

Free Senior’s Guide

Receive a Free Senior Living Insders Guide!

Free Senior’s Guide
Free Newsletter

Receive periodic news relating to active senior living!

Free Newsletter
Money Saving Deals

Get money saving deals and Special Offers for Seniors!

Money Saving Deals