At least once a week, someone calls our office asking about transferring a home so that they can receive long term care benefits through New York Medicaid. We encourage them to approach this idea with caution; sometimes the idea is rooted in misinformation or, in the worst cases, fraud. Every situation is different, but there are several common factors to consider when making this decision.
- Medicaid’s Home Equity Limit. In determining whether you are eligible for benefits, Medicaid does not consider your primary residence a resource unless you have $893,000 in equity. For example, if you home is worth $800,000 and you own it outright, or if your home is worth $900,000 but you your mortgage is $400,000, Medicaid does not count your home in determining whether you are eligible for benefits.
- Tax Consequences. Transferring a home can have unintended tax consequences for you and your beneficiaries. Many of our clients receive property tax exemptions that are based on their age, their income or both. If your home is transferred to child, that child may not qualify for those same exemptions and your property tax bill can increase significantly. In addition, after you pass away, if your child decides to sell your home, they could be looking at a large tax bill for the capital gains. These consequences can be avoided with just a little bit of planning!
- Losing Control Over Your Home. When you transfer your home to another person, you lose control over what happens to it. It could be that your child having legal control of your home is okay; after all, not too many children are selling their parents’ homes out from under them. However, a parent’s home, when it is in the child’s name, now becomes subject to that child’s creditors. If, for example, that child loses a major lawsuit, the parent’s home could be at risk. Losing control involves more than choosing to renovate the kitchen!
- Medicaid Transfer Penalties. Generally, when you transfer an asset and don’t get a fair price for it, Medicaid considers all or a portion of that transfer “uncompensated.” If you apply for benefits within a certain amount of time, Medicaid will impose a transfer penalty, meaning that you will be eligible for benefits, but Medicaid won’t pay for your care for a specified period of time. That time period depends on the value of the property you transferred.
The way in which these factors play out is different for each person. If you are thinking about transferring your home, an elder law attorney can walk you through how each of these factors will impact you and help you make the right decision. We’re here to help you understand your options!