Man and woman shaking hands, agreeing on the living will.

Should You Give Your House to Your Children to Protect it from Medicaid?

After a lifetime of hard work, many seniors are disappointed to learn that they can’t afford the nursing home care that they need. The average cost of nursing home care in Massachusetts is $4,740 per month. For many families, qualifying for Massachusetts Medicaid insurance, also known as MassHealth, is the only way to pay for long-term nursing home care. 

At Surprenant & Beneski, PC, many of our clients are afraid that they will lose their home if they enter a nursing home. Sometimes, they rush to give their homes to their children. This is often not the best idea. As always, we recommend speaking to an experienced lawyer before making any decisions. We can help you engage in MassHealth care planning while helping you protect your assets.

If You Give Your House to Your Children, You Might Still Be Ineligible

If you transfer ownership of your home to your children or your friend, you might still be ineligible for MassHealth for some time. MassHealth agents will look at any transfers of your assets that you’ve made within five years of the date you applied for MassHealth. 

For example, if you gave your child your house six months before applying for MassHealth, MassHealth agents will impose a penalty for a time period. During this period, you will not be eligible for MassHealth benefits. Depending on the value of the house that you gave your children, the period of ineligibility could last for years. A qualified elder law attorney can advise you of some of the ways you can give your home away while still qualifying for Medicaid. 

Adverse Tax Consequences for Giving Your Home Away

When you give your home to your child, the property’s tax basis is the same price at which you purchased the home. For example, if you purchased the home for $500,000, the basis for the property will be $500,000. If your child decides to sell the house, your child would have to pay capital gains taxes on the difference between the home’s selling price and the tax basis. 

Your child would be able to avoid some or all of the capital gains taxes if he or she lived in the home for at least two years before selling the home. Keep in mind, that some adult children may not have the means to pay property tax, or they might not be in a position to move into your home and take care of a home.

You Will Lose Control of Your Home

When you transfer your home to your child, you will lose control of your home. Even if you trust your child and have a good relationship with your child, you will still no longer legally own your home after you transfer the title to your child. Should your child get divorced or file for bankruptcy, the home could be taken by creditors or your child’s ex-spouse.

We Can Help You Protect Your Home from MassHealth Estate Recovery

If you or a loved one are concerned about paying for nursing care and qualifying for MassHealth, our experienced estate lawyers can help. In many cases, we can help clients create a life estate deed, or transfer the title of the home into an irrevocable trust, to protect the asset. While giving the home to your child as soon as possible might seem like a quick fix, it could create negative legal and tax consequences for you and your child in the long term. Contact Surprenant & Beneski, PC today to schedule your initial consultation.