Brenner answers questions about all aspects of family finance.
I'm an 87-year-old widow. My son has always lived with me. My will says he inherits the house; but he's been told that if I need long-term care, Medicaid can take our home. What are the current rules?
Medicaid can't touch the house during your lifetime while your son lives there. He's a "caretaker" child -- an adult child who has lived with you for at least two years. But Medicaid could put a lien on the house and recover money paid for your nursing home care after your death, says Bernard A. Krooks, a New York City elder-law attorney. Your son couldn't be forced out, but whenever the house was sold, Medicaid could recover its outlay from the sale proceeds.
Transferring the house to your son now would protect it from Medicaid after your death. Normally, an asset transfer delays your Medicaid eligibility for five years -- but there's an exception for transfers to a caretaker child.
The downside: If you transfer it to him during your lifetime, whenever he sells it, he'll owe taxes on the difference between the sale price and what you originally paid for it.
Instead, Krooks suggests you transfer the house to him but keep a life estate -- the right to live there until you die -- for yourself. If you keep a life estate and your son doesn't sell the house until after your death, he'll owe taxes on the difference between the sale price and its market value when you died.
At present, Medicaid has no claim against the dollar value of your retained life estate after you die. Last year, New York State passed a law giving Medicaid the right to make such claims but repealed the law in March.
The bottom line For Medicaid planning, consult an elder-law attorney.
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