Nichole Y. Shafer
Guest Columnist
Everyone needs a place to live, and not everyone owns their home. But for those who do, our home is often one of our most valuable assets, if not the most valuable. This is due to the cost paid to acquire the home and also in the upkeep and maintenance of our homes.
If you are no longer able to live in your home, then someday you could have to pay for a long-term care facility. This may include a nursing home, assisted living center or, if you’re able to stay in your home but just need assistance, then in-home medical care.
For those who cannot afford the cost of long-term care, there are government programs that can assist with the cost. These government programs commonly are called institutional Medicaid, assisted living waiver or passport, and they can shift the financial responsibility to pay for long-term care from the patient to the government.
Most people are aware that the two big requirements to be eligible for institutional Medicaid are having a financial net worth of less than $2,000 and not having given away any gifts to anyone to become that poor.
Some people want to be extra proactive in protecting their most valuable asset (their house) as soon as possible to avoid having to use their home to pay for a long-term care/nursing home facility.
If a person is proactive enough, they can possibly protect assets if they need long-term care more than five years after the gift.
However, just deeding and/or giving the house to the kids could lead to capital gains taxes for the kids if the kids eventually sell the house. If the parents own a house and use it as their primary residence, the parents can usually gain up to $250,000 of sales proceeds tax free. This is above and beyond the house’s initial purchase price, due to the house being the primary residence of the owners/sellers.
But if the parents give the house to the kids, the kids sell the house and the kids did not use the house as their primary residence, the kids will likely have capital gains. Capital gains typically result in a tax of the house sale price minus the parents’ initial purchase price.
Additionally, another potential issue with gifting your house to your kids is that some kids evict parents from their homes. Thus, parents who gift their homes to their kids should take proactive steps to ensure their kids cannot evict them and that they are able to reside in the home for the rest of their lives. There are also additional issues with gifts of your house to your kids.
Ohio is a dower state, meaning if kids own a house, the kids’ spouses will be required to sign off on any home equity loans, sales or easements that affect the home.
Due to all the negative downsides that can result when gifting your home to your kids, most people who want to protect the value of their home will discuss other nursing home tools available to them with their attorney when they want to be proactive about protecting their most valuable asset.
Nichole Y. Shafer is an Ohio-licensed attorney at Schroeder Law LTD in Putnam County. She limits her practice to business, real estate, estate planning and agriculture issues in northwest Ohio. She can be reached at [email protected] or at 419-659-2058. This article is not intended to serve as legal advice, and specific advice should be sought from the licensed attorney of your choice based upon the specific facts and circumstances that you face.
