Among them is the desire to save on death taxes and most importantly to protect their home from nursing home costs. The transfer of a home from parents to children may result in a savings on death taxes. Unfortunately, however, the transfer of a home may also have several negative consequences that are often overlooked. For example, in some cases giving your home to your children may actually expose more of your assets to nursing home costs.
When you are no longer able to pay privately for needed nursing home care, Pennsylvania ’s Medical Assistance program helps pay for your care. The home and related real estate of a nursing home resident are normally protected assets. It is important to understand that your home does not have to be sold to pay for nursing home care as long as either you or your spouse considers it your primary residence. Moreover, if you give your home to your children and then need to apply for Medical Assistance within 5 years of that “gift,” the transfer of this otherwise protected asset can make you ineligible for sometime. The ineligibility period depends on the value of the gift (your home in this instance). Therefore, transferring your home to your children may be a terrible mistake if you are likely to need nursing facility or home care in the near future.
Although the state does not place a lien against your home while you are receiving Medical Assistance, they may try to recover the amount contributed from the estate once you have passed away. This program, known as Pennsylvania Medical Assistance Estate Recovery, is a collection program required by federal law. It only applies to what Medical Assistance pays for nursing facility, home or community based services and any related hospital and prescription drug services for individuals who were 55 years of age or older. Estate recovery is often misunderstood and sometimes prevents seniors from applying for much-needed services, but with proper planning and good advice, estate recovery can almost always be avoided.
Parents and children are usually unaware of the potential consequences when merely transferring the home. There are many planning tools and options available for families and every situation is different. You should never give your home away without understanding all of your options and fully considering the advantages and disadvantages of such a transaction.
Attorney Marshall is a Board Certified Elder Law Attorney by the National Elder Law Foundation. He is the author of the book Elder Law In Pennsylvania. Attorney Marshall is the managing attorney of the Elder Law Firm of Marshall, Parker & Associates' with offices in Williamsport, Jersey Shore, Wilkes-Barre & Scranton. He can be contacted at webmail@paelderlaw.com.
