2010/04/26 00:00:00
By Nanette Lavoie-Vaughan
A family home is the most important asset to many seniors because they view it as the one legacy they can pass on to their children and grandchildren. However, the rights to your parents’ home can be affected by credit problems, divorces, uncooperative relatives, probate court after their death, and Medicaid laws should they need longterm care.
Doing nothing — leaving the family home in your parents’ name — might not be the best option. Asking your parents to turn over their home outright to you or your siblings without retaining any of the rights also might be unwise. So what is the right option is for your family? The National Academy of Elder Law Attorneys, Inc. offers these suggestions:
- Joint ownership: Your parents may sign a deed adding their beneficiaries to the title as joint tenants with rights of survivorship.
- Revocable living trust: Your parents retain all rights to the use and control of their home. Upon their death, beneficiaries of the trust acquire the right to receive the home, free from court supervision.
- Irrevocable living trust with retained rights: Your parents retain limited rights to control their home, and they appoint a trustee as an advisor. If they wish to sell their home or take out an additional mortgage, they must consult the trustee. Your parents cannot amend the trust once it has been established. After beneficiaries of the trust receive the rights to the home.
- Transfer to beneficiaries but homeowner retains life estate and special power of appointment: Your parents transfer their home to their beneficiaries but maintain lifetime rights to exclusive use of the home. The special power of appointment allows them to remove a beneficiary from the title for estrangement, divorce, or credit problems. Upon your parents’ death, the beneficiaries own the full title to the home.
- Transfer of beneficiaries but homeowner retains life estate and power of sale: This option gives your parents all of the same rights as No. 4, and, in addition, the power to sell their home — and retain all of the proceeds of the sale — without consent of the beneficiaries.
Thoroughly research and discuss each option with your parents and siblings in conjunction with an attorney who specializes in elder law. These attorneys are well-versed in the intricacies of estate law and Medicaid regulations, which vary from state to state.
If your parent should need longterm care and is unable or can’t afford to cover the expenses, he or she can apply for Medicaid.
Your parents’ home will be considered an asset, and Medicaid will look back at any transactions related to the title for five years previous to the application. There are four ways your parents’ home or its value can be lost if they receive Medicaid funding:
- Setting up an ownership option might result in their home no longer being an exempt asset.
- An ownership option completed less than five years before applying for Medicaid might trigger a disqualification for Medicaid funding.
- The Medicaid rules in your parents’ state might discourage them from keeping their home.
- After your parents’ death, their state’s estate recovery program might require their home or its value to be used to reimburse Medicaid payments made on their behalf.
Consulting an attorney and having an open discussion with your parents can allow them to maintain control of the family home during their lifetime, avoid the hassles of probate court after their death, and secure effective long-term family succession of this cherished asset.
Remember, it’s also important to consider the tax implications of each option, so that your beneficiaries don’t lose out at tax time.
For more information on how to find an elder law attorney near you, visit www.naela.org.
About the Author: Nanette Lavoie-Vaughan is an adult nurse practitioner and professional consultant. She is a featured speaker at national professional conferences and writes about geriatrics for multiple publications.
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Copyright Nanette Lavoie-Vaughan and Military Officers Association of America. All rights reserved.
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