Your Home, your Children, and Medicaid
You want to protect your home from MassHealth/Medicaid. You want to be proactive and do this before you have to enter a nursing home. Should you transfer it to your children? Probably not.
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Typically, one doesn't have to sell one's home to be eligible for Medicaid to cover the expense of nursing home care. However, the state will try to reimburse itself for nursing home Medicaid expenses from your estate after you die. One way the state will try to recover your Medicaid benefits is by filing a claim against your house. To protect your home from Medicaid you may be considering transferring it to your children. Before making this decision there are a few issues to keep in mind.
Medicaid reviews transfers made within five years of a Medicaid application. Transferring your home to another party may make you ineligible to receive Medicaid benefits for a period of time. Transfers made for less than market value during that period will result in the penalty of not receiving benefits for a period of time which could last for years.
Certain situations do allow you to transfer a home without penalty. Consult with an attorney to find out if these circumstances apply to you.
Remember, whomever owns the house has control over it. If you have transferred it to your children, they are in a position to make all decisions regarding the house. If your children are sued or get divorced, the home will be vulnerable. A divorce could mean that you live in your ex daughter in law's house!
There can be tax implications for your children if you have transferred your home to them. When selling inherited property, the cost basis is the home's current value. When you give your home to a child the basis on which the property is taxed is the price which you purchased it at. The capital gains tax is reduced if the child lives in the house for two years or more before selling it.
Various approaches can be used to shield your home from Medicaid estate recovery. Consult with your attorney to ascertain the approach that works best for you.