You own a home or possibly a family farm and you’ve heard it’s a good idea to “give it to the kids”. Maybe this is a way to help your children before you spend all your assets on health care or general living expenses.
Here are some thoughts:
- MEDICAID: You’ve heard of the “5 year look back period”. Basically, anything you gift had to be done so 5 years before you apply for Medicaid for Long Term Care needs.
- WHO OWNS THE HOME? Once you give the property to the kids, it belongs to them. Quite honestly, they can do whatever they want to it at that point. Make additions, take down the barn, pull up the flower bed. It is their house now.
- RISK AGAINST THE HOME: If your children face a bankruptcy, divorce, or lawsuit these situations may necessitate the sale of the home you are living in to settle their claims.
- TAXES FOR THE KIDS: Let’s say you bought the farm for $50,000, you give it to the children, and they now want to sell it. Today the property is worth 550,000. Your children may need to pay a Capital Gains tax on the $500.000 profit. (If on the other hand, the property transferred at death by way of will or trust, the cost basis for the children would now be $550,000, thus NO Capital Gains Tax for your children.
There may be safer and more cost effective ways to transfer real property to your loved ones. Seeking the advise of an experienced Estate and Elder Law Attorney would be a good place to start.
If you have any specific questions, please to do not hesitate to write: email@example.com
Rick Messemer, Certified Senior Advisor Community Education