Think Twice Before Giving Away Your Home
Transferring ownership of the family house to children is a popular strategy throughout Connecticut for some families looking to qualify for Medicaid nursing home benefits. In some cases, when part of a well thought-out plan designed specifically for the family involved, this strategy has worked. In other cases, when this decision is hastily made without proper advice, the strategy can be disastrous.
Liability. Let’s assume you’ve made your children owner of your home. Part of what you have done is put your residence within the reach of your children’s creditors. If they are ever in an accident, get into financial trouble, or get divorced, your house is now in jeopardy.
Taxes. Under the current estate and income tax rules, when your children inherit your residence they will receive a step-up in basis that serves to eliminate the capital gain built into your house. If you gift your house to your children, they will not get the full benefit of this step-up in basis and will almost certainly be subject to capital gains tax on a portion of the sale when they sell the property.
Should you give your house to your children? I don’t know enough about you. Should you carefully consider the ramifications of such a significant step? Absolutely.
For additional information on what you can do to protect yourself from nursing home costs, click here.
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