"Should I Transfer the House to the Kids?"


To start off, I want to warn you that you will be disappointed by this post.  You probably Googled the above question and stumbled upon this post with the hopes that you will find a definitive "yes" or "no" answer.  Unfortunately, as simple as the above question sounds, the legal analysis used to arrive at an anser is lengthy enough that I would probably be committing legal malpractice by even suggesting that there is a universally applicable answer. 

There.  Now that that's out of the way, here's what you will learn from this post:  as self-serving as this may sound, in order to find a good answer to this question, you need to sit down with an experienced elder law attorney who can walk you through all of the pro's and con's of transferring ownership of the house to the kids (or someone else) in order to avoid the need to sell the house and spend the proceeds down on the nursing home at some point in the future. 

And here is a non-exhaustive list of all the issues to consider:

  • Gift tax.
  • Capital gains tax.
  • The dreaded "5-year look-back" period for Medicaid.
  • Will the kids turn evil someday (perhaps they already are evil?) and try to evict you from the house?
  • Will this transfer result in an unintended distribution of your estate upon your death?
  • Will one of the kids get sued someday, resulting on the property?
  • Will one of the kids get divorced someday, subjecting the house to a divorce settlement process?
  • Are one of the kids getting asset-tested government benefits?
  • Should you retain a "life use" (a.k.a. "life estate") in the property?  It could be helpful tax-wise, but it could be problematic for Medicaid eligibility.
  • Will you lose a senior or veteran real estate tax credit that you currently enjoy?
  • What are the odds that you (based on your health, family medical history, level of local family support) will need permanent nursing home placement in the future?

In short, whether to gift the house to the kids is a short and simple question.  But settling on the answer to that question is a complicated process with a lengthy list of issues to consider. Also, since every family is different, there is no one-size-fits all answer to this question.  In other words, just because your neighbor three doors down the road gifted the house to his kids does not necessarily mean that you should too. 

DISCLAIMER: This blog does not offer legal advice, nor does it create an attorney-client relationship.  If you need legal advice, consult with a lawyer instead of a blog.

Gifting with a Power of Attorney

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Not surprisingly, I am not a big fan of fill-in-the-blank estate planning documents that you can get online or from an office store.  There are many reasons for that, but one big reason is that online forms for a durable power of attorney (POA) often do not offer a "gifting" provision.  Or they do offer such a provision but there is no advisor involved to explain the benefits (or occassional pitfalls) of including such a provision in your POA.

The take-home lesson for today is this:  An agent under a POA cannot gift assets on your behalf without express authorization to do so in the POA document. 

At first glance, this may not seem like a big deal.  But it certainly becomes a big deal if/when transferring assets out of your name for Medicaid or tax purposes becomes highly advisable.  

In the context of a Medicaid application, the State of Connecticut will most likely pretend that such a gift (made by a POA agent without authorization) didn't happen and treat the gifted asset as an "available asset" for the Medicaid applicant. 

For real estate title purposes, if a POA agent transfers property without express authorization in the POA document then title to the property has not been effectively transferred.

These are just two examples of big problems that can occer when your POA document does not have adequate gifting language.

It is also worth mentioning that if you want your agent to have authority to make gifts to himself/herself, which is often the case when a spouse or trusted child is the agent, then that should be specifically spelled out in the document. 

Of course, having said all of that, there can be good reasons to not include gifting powers in a POA, depending on the circumstances.  The point is that this particular POA issue should be discussed thoroughly with your attorney.

DISCLAIMER: This blog does not offer legal advice, nor does it create an attorney-client relationship.  If you need legal advice, consult with a lawyer instead of a blog.

What are the Odds of Nursing Home Placement?

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Whenever I sit down with clients to plan ahead for Medicaid eligibility we spend a lot of time walking through the worst-case scenario of permanent nursing home placement, thereby triggering approximately $12,600 per month in nursing home fees (Connecticut is the 2nd most expensive state in the U.S. when it comes to nursing home care).  But it's also important to at least consider the possibility that the client will never actually need to be placed in a nursing home. 

There is no "crystal ball" to use and nothing can be guaranteed, but there are factors to consider when trying to determine the odds that you will need permanent nursing home placement at some point in the future.

Is there a history of dementia and/or Alzheimer's Disease in family?  It seems like these are the types of conditions that most often trigger the need for long-term nursing home placement, and they are very hereditary.  Other issues like diabetes, a heart condition, a bad hip etc. can usually be managed adequately at home.  

Do children, grandchildren and other family members live nearby or are they beyond driving distance from your home?  The larger the local support network, the less likely that you will need to be permanently institutionalized.  

How extensive are your liquid assets?  Even if you don't have long term care insurance in place, the more you have in investments, bank accounts, retirement accounts, etc., there is a greater possibility that you will be able to provide yourself with home health care and/or companionship to keep you in the community.

I always advocate for planning for the worst and hoping for the best.  However, you need to realize that future nursing home placement is not a "given", and if the chances of requiring institutionalization are remote based on your own set of personal circumstances then you should factor that into your planning. 

DISCLAIMER: This blog does not offer legal advice, nor does it create an attorney-client relationship.  If you need legal advice, consult with a lawyer instead of a blog.

What is the Medicaid "Pick-Up Date"?


A lot of my Medicaid clients get confused over the date that Medicaid coverage kicks in (also known as the Medicaid "pick up date") once Medicaid eligibility has been determined by the State of Connecticut.

The short answer is that Medicaid can start as early as the first day of the month during which the Medicaid "spend-down" was completed, assuming that there are no issues with periods of ineligibility that have been triggered by gifting during the 5-year look-back period.  So, if an applicant spends his/her assets down below the Medicaid asset limit ($1,600) on November 20th, then Medicaid coverage can begin retroactively on November 1st.

Why would it start later than the first of the month?  Because if the spend-down included private payments to the nursing home which effectively paid for nursing home care past the first of the month, then the nursing home would not need Medicaid coverage until later in the month. 

So, in the above example, let's assume that the Medicaid applicant made a partial payment to the nursing home as part of her spend-down and that payment covered her up until December 10th.  In that case, the Medicaid pick-up date would be December 11th so that the payment for care would be "seamless" for the nursing home.

DISCLAIMER: This blog does not offer legal advice, nor does it create an attorney-client relationship.  If you need legal advice, consult with a lawyer instead of a blog.