Give My Home to My Children?

Many older adults consider giving the family home to their children.  They know why they want to do it.  Here are some reasons why they might decide not to.

1.  YOU MAY IMPOVERISH YOURSELF TOO SOON

Some people assume that they will be living independently at home one month, and will find themselves in a nursing home the next.  While that does happen, it is not most common.  More often age gradually reduces our abilities to be self-sufficient, and we need increasing help with different things.  The ability to pay for help in one’s own home, or to finance the cost of an assisted living facility where such help is provided, is important to maintaining independence and dignity.  If the home is a large portion of one's assets, then giving it away now impairs such future choices.

2.  YOUR RIGHT TO CONTINUE LIVING AT HOME COULD BE JEOPARDIZED

Most people trust their children, and with good reason.  However, even if your children do not betray your trust, events beyond their control may.  If a child unexpectedly dies, his property interest in “your” home will likely go to his spouse or his children.  If he divorces, his interest in “your” home may be part of the divorce proceedings.  If he loses his job or if he or one of his dependents becomes seriously ill or disabled, debts may spiral and “your” home may fall prey to his creditors.  If he accidentally injures another and has inadequate insurance, “your” home may be used to compensate the victim.  If your children do not get along among themselves, their disputes may carry over to affect “your” home.  Although there are legal mechanisms which can protect against some of these risks, those steps may involve more expense and complication than you like.

3.  YOUR PROPERTY TAXES MAY INCREASE

If you enjoy reduced real estate taxes because of your age or income, your children will lose that tax break when they own your home.

4.  YOUR CHILDREN MAY PAY INCOME TAX.

If you are like most people, you bought your home years ago, and it is worth more today than what you paid for it.  Assume that you paid $40,000 for the house and its present value is $100,000.  If you sold it, you would pay no income tax on the $60,000 "profit."  However, if you gave the home to your children and they later sold it, they would be taxed on that “profit.”

5.  YOUR ELIGIBILITY FOR MEDICAID MAY BE AFFECTED

If you need Medicaid assistance to pay a nursing home bill or an assisted living facility within five years of giving away your $100,000 home, you will be penalized.  When you are out of money, Medicaid will still withhold its assistance for almost 17 months.  This would put you “between a rock and a hard place” – no money left yourself to pay the facility and no help from the State to do so.

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