The first thing we tell clients is it is never a good idea to transfer the title outright to the children without retaining a life estate, or lifetime interest in the home. A retained life estate is assurance that you have the lifetime right to reside in the home, to collect any rents, to keep any real estate tax discounts or exemptions and that the house will pass free of capital gains tax to your beneficiaries.
   Transferring the home with a retained life estate also begins to protect the home in the event you have to apply for Medicaid in the future. If you transfer your home to your children without keeping this lifetime interest, the capital gains and real estate tax benefits will be lost and your home could be subject to a lien for your children’s debts. In addition, your children could sell your home without your permission if no life estate is retained on the deed.
   People frequently ask next what would happen if their child predeceased them, with the child’s name on the deed to the house. The answer to that question is, the child’s interest in the house would pass to the child’s beneficiaries through a will, if there is one, or by intestacy. That means that the grantors’ son-in-law or daughter-in-law may have an interest in the house under those circumstances. This is not always (in fact hardly ever) what people would want to happen. For that reason, we advise, in addition to the life estate, to keep a limited power of appointment, so that if circumstances change with respect to beneficiaries, the grantor can change the ultimate beneficiaries to other family members. The limited power of appointment has no effect on Medicaid eligibility and has tax advantages as well.
   Transferring the deed to real property to an irrevocable trust has all the advantages we have already mentioned, with some added protections. The life estate and limited power of appointment can both be written into a trust. In addition, if the property needs to be sold during the grantor’s lifetime, the trust can purchase another property, or the proceeds from the sale can be held in the trust, and will be protected in the event the grantor should need to apply for medical assistance for long-term care.
   In addition to avoiding probate, people transfer real estate titles to protect the value of their home from their medical bills. With people living longer lives, it is likely that they will need some form of long-term care at some point. Medicaid liens can be placed only on probate property and after transfer the home is protected within a certain period of time.
   Keep in mind, this is only a brief snapshot of the advantages of transferring the title to your home. The disadvantage, naturally, of transferring your interest in the home is that you lose complete control of that asset. For example, while the house cannot be sold without your permission if you keep a life estate, you need the permission of anyone else named on the deed to sell the house as well. Certain additional restrictions may apply to cooperatives and condominiums, or when there is a mortgage on the property.
   Most of all, remember that everyone’s circumstances are unique — it is best to have an attorney familiar with the Medicaid rules (which change all the time) thoroughly review all options with you and advise you as to the costs involved. Make an informed, well thought out decision and do not allow anyone else to pressure you — this important choice is yours to make!
   For additional information visit Brady & Marshak, LLP, Attorneys at Law, at any one of three locations — Howard Beach: 156-36 Crossbay Blvd., Suite B1, (718) 738-8500; Belle Harbor: 129-04 Newport Ave., (718) 945-7777 and Great Neck, L.I.: 4523 Arcadia Lane, (516) 829-8265.
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