If you own your home with no debt on it, and you don’t think you will want or need a reverse mortgage in the future, and you want to make sure your children will inherit your house, then it’s a good idea to consider the following strategy. Deed your house to your children, or to a trust for their benefit, and retain for yourself a “life estate.”
This will make it so you retain full and absolute ownership during your life. You will continue to get the favored 4 percent special assessment tax rate, and you will remain entitled to the rents.
The biggest thing it will do is to guarantee that if you need Medicaid within five years, that (1) the transfer to your children of the remainder interest will not create a period of ineligibility for Medicaid, and (2) your house will not be taken by the state as reimbursement for its paying for your care.
If you implement this strategy in a timely manner, then you will continue to own your home during your life, owning it will not count against you in qualifying for Medicaid, and your kids are guaranteed to inherit the house, even though you might have benefited from Medicaid. This must be done sufficiently in advance to have the desired result.
Seventy percent of people in nursing homes in the U.S. are on Medicaid. In order to get Medicaid, you need to “qualify.” In this regard, your general power of attorney should probably permit your agent, under limited circumstances, to engage in benefits and Medicaid planning for your benefit.
If you “qualify” for Medicaid, then the state can seek reimbursement by taking your house when you pass. Yes, the state can take your house when you pass. It will not take it during your life even if you get Medicaid.
This is a perfectly appropriate and viable strategy-technique to deed away now your future interest beyond your life. If this is done sufficiently in advance, this transfer will not create a period of ineligibility for Medicaid, and it will guarantee the house will stay in your family as you intend.
Planning in advance is critical to success in this arena. In other words, those who snooze, lose – or, more accurately stated, those who snooze have kids that lose.
Mark F. Winn, J.D., Master of Laws (LL.M.) in estate planning, is a local asset protection, estate planning and elder law attorney. www.mwinnesq.com