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Protect the Family Home – Transfer to Children vs. Irrevocable Trust

This edition of the Koldin Law Center E-Newsletter begins a series on protecting the family home.

This newsletter reviews Estate Planning options when you are generally healthy.

The remaining newsletters in this series review how to protect the family home even when you are already in a Nursing Home.

All prior newsletters are saved on our website. You can read them by clicking here.

Clients often come to our office and tell us that the most important objective they have is to protect their home from being lost towards the cost of long term care.

This newsletter reviews the advantages and disadvantages of (1) transferring the family home to children while reserving a life estate, or (2) transferring the family home to an Irrevocable Trust.

When taking steps to protect the family home, there are important Medicaid asset preservation and tax planning considerations.

Tax planning considerations include preserving the $250,000 individual exemption ($500,000 for married couple) on the capital gains from the sale of the home and preserving the stepped-up basis date of death value of the home for the remainder beneficiaries.

Transfer the Home to Children and Reserve a Life Estate

Your children would receive a stepped-up basis to the date of death value of the home if they sell the home after your death.
A gift tax return may need to be filed.
It is possible that a portion of the $250,000 family home capital gains tax exemption ($500,000 for married couple) can be preserved based on the value of the life estate.
You would still receive certain tax exemptions such as STAR and Veterans.
A life estate prevents your children from being able to sell your residence until your death unless you sign the deed (Note: Your Power of Attorney might be able to sign the deed on your behalf).
Once the five year lookback period has elapsed, your property would not be counted for Medicaid eligibility purposes.
If a Medicaid recipient owns a life estate to real property, the net income earned by the property (rent), will have to be paid to the nursing home.
If the property, including the life estate is sold, the life estate portion of the proceeds of sale might need to be applied towards the cost of care.
Your children now own the house and if problems arise in your children’s lives, the house becomes subject to their problems, such as death, divorce or creditors.
If you later want to sell your house, your children do not have to agree to sell.
If you later have a dispute with your children, they do not have to return ownership of the house to you.
You can no longer change your mind regarding who ultimately inherits your home.

Transfer the Home to an Irrevocable Trust Prepared by Koldin Law Center, P.C.

There are many ways to prepare an Irrevocable Trust and the terms of the Trust can be different depending on your circumstances and how your attorney writes his/her Trusts. Therefore, the information provided below is based on a typical Irrevocable Trust prepared by the Koldin Law Center, P.C.

Your children would receive a stepped-up basis to the date of death value of the home if they sell the home after your death.
You would still qualify for the $250,000 family home tax exemption on capital gains ($500,000 for married couple) when your home is sold.
The transfer to the Trust is not considered to be a gift for gift tax purposes.
You would still receive certain tax exemptions such as STAR and Veterans.
Once the five year lookback period has elapsed, your property would not be counted for Medicaid eligibility purposes.
If a life use is reserved in the deed transferring the property to the Trust, this would prevent the Trustees from being able to sell your residence while you are still residing in the residence unless you sign the deed (Note: Your Power of Attorney might be able to sign the deed on your behalf).
You retain the right to change the beneficiaries of the Trust. Therefore, if circumstances change in your children’s lives or in your relationship with your children, you retain ultimate control over who inherits your home.

For more information about Irrevocable Trusts, please see our website by clicking here.

The next edition of the Koldin Law Center E-Newsletter will begin a review options for how you can protect your home after you are already ill and even when you are already in a Nursing Home.

At the Koldin Law Center, P.C., located in East Syracuse, New York, we have over 50 years of experience helping individuals plan for immediate crisis and long term care. Our attorneys are available to discuss your estate planning options, including the advantages and disadvantages of Revocable Trusts and Irrevocable Trusts, along with other estate planning considerations including a Will, Power of Attorney, and Health Care Proxy. We do not charge a fee for the initial consultation. We welcome your children, family attorney, accountant, and/or financial planner to be present at the initial consultation.

There is something you can do.

Our Attorneys are available to speak to your organization

Our Attorneys speak to groups throughout New York State as a public service. If you would like to arrange for one of our Attorneys to speak to your group, please contact our office.

We appreciate your referrals

We have been told by many clients who are in a crisis that they wish they had known about our firm much sooner. We are proud of the many families we have helped in times of crisis.

We are also proud of the many families we helped avoid financial crisis by doing estate planning in advance.

We all share the responsibility for making our family and friends aware of the planning options available to them.

Your referral to the Koldin Law Center could make a major difference in the lives of your family and friends if they are someday faced with a long term illness.

Remember that the Koldin Law Center offers many services for clients of all ages. Our services range from basic estate planning such as a simple will to complex estate planning including asset preservation planning.

THERE IS NO FEE FOR THE INITIAL CONSULTATION