Should My Parents Put their Home in My Name?
My parents are thinking of putting their primary and only residence into my name so they would qualify for reduced rates in a residential facility if need be. The home is worth about $500K and they have about that much in an investment account, which they live off of. They are both healthy at this time and have long-term care insurance, but we are trying to think ahead. They are both Florida residents, but will likely move to Massachusetts if they needed to be in a residential setting.
There are, of course, pros and cons to any long-term care or Medicaid planning step. The advantage of the transfer would be that after five years the property would not be counted as belonging to your parents should they need public benefits down the road. But there are possible disadvantages, including:
• Loss of control for your parents and putting the property at risk should something adverse happen to you.
• Your parents could not use their capital gains exclusion ($250,000 each) upon the property’s sale. If it were sold in your name, you would have to pay a tax on the capital gains.
• You would not receive a step-up in basis upon your parents’ deaths. This also would mean that you would have to pay a tax on capital gains if you sold the property after your parents’ death, a tax you would not have to pay if your received the property as an inheritance rather than as a gift.
A trust can protect against many of these disadvantages, with its own pros and cons. I would also add that the five-year Medicaid look-back period may not be such an issue in your parents’ case. If one of them were to fall ill, they would still have their other $500,000 in investments plus their long-term care insurance. They could take steps at that point to protect their assets when they will know more about the “facts on the ground” as opposed to speculation about how things might turn out.
In any case, given all the moving parts I’d recommend that you and your parents consult with an elder law attorney. You can find one at www.elderlawanswers.com.