Should I just give my house to my children now to avoid any problems related to nursing home care?

by Olivia Wann, JD

As discussed in prior videos, Medicare only pays a maximum of 100 days for nursing home care costs. The remainder of long-term care would be an out-of-pocket expense or covered by Medicaid if you qualify.  The state’s Medicaid program would seek reimbursement for funds paid for long term care meaning your home could be recovered by the state to satisfy any monies owed for your nursing home stay. The state can force a sale through a public auction.  

Some clients have proposed just giving the home away. This can be problematic. First, if you give away your house to your children now, you have lost control of the property. What if you change your mind? What if you want to buy a condo on the beach? Legally the house now belongs to their children, and they can opt not to sign the deed or agree to your new purchase. 

Another issue that is raised is that of capital gains.  Let’s say for example you purchased your home in 1975 for $50,000.  Now the property is worth $350,000.  If you merely give the house to your children, they lose the step-up basis in capital gains tax. In other words, if they sell the home after your death, they will be subjected to paying tax on the $300,000 increased valued which is approximately $60,000 in tax.  This could have been avoided if they inherited the home through a will or trust.

For asset protection, you may opt for an irrevocable trust which we refer to as a Medicaid Asset Protection Trust.  

Keep in mind there is a 5-year look back period for any property transfers for purposes of Medicaid eligibility.

Consult with an attorney knowledgeable about estate planning in order to make a decision that suits your lifestyle best.