In our last post, we discussed one of the ways which people think they can help themselves qualify for Medicaid — giving away their money to friends and family. While it is true that the IRS allows you to give away money with no negative tax repercussions (up to $14,000 per year, to as many people as you want), there are some drawbacks to doing that. In this blog we will clear up another common misconception that people have when it comes time to apply for Medicaid — giving up your home.
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Misconception: Giving Away Your Home Can Help You Qualify for Medicaid
As we mentioned in the last post in this series, Medicaid looks at the way you give your assets away differently than the IRS does. While transferring ownership of your home to a family member will come change everyone’s taxes, it will not benefit you in any meaningful way when it comes time to apply for Medicaid. Not only will the $9,000 rule work against you, you may see something happen to your home that you aren’t happy with. If you leave your home to one of your children, if they are married and then get divorced, your house might become property of your former child-in-law or it may need to be sold in order to pay for a settlement. You didn’t work as hard as you did just to watch your home disappear. This can be especially hard to deal with if you are still living there!
A Trust Might Be Your Best Option
Instead of giving your home to a family member and hoping that things work out for the best, one way that can help you protect your assets from lawsuits, settlements, and from hurting your Medicaid eligibility, is to create a trust. A trust is an arrangement where someone transfers their assets to the trust which is then managed by a trustee. There are many advantages to a trust. First, because the property in them is no longer yours, your tax liability may change which can help you qualify for Medicaid and other programs. Second, it allows you to leave very detailed instructions about how the assets of the trust are to be distributed to beneficiaries. Trusts are also set up to avoid probate, which can make asset distribution easier and faster than going through the probate process.
Call us at Safe Harbor Wills & Trusts today to learn about all of the different ways that we can help you protect your assets. We have offices in Syracuse and Watertown, so please get in touch so we can set up a meeting.