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.