Andy wrote:

- quote -

You can't take it with you. What's the point of having
assets, if not to enjoy them during your lifetime? And why
should the hard-working person's children (who either worked
hard, have their own stuff, and don't need it; or failed to
work hard, have nothing, and don't deserve it) be left with
something, while unrelated people (the taxpayers footing the
bill) get less than nothing?

- quote -

I'd like the satisfaction of knowing that I have $1,000,000
in the bank. I'd be delighted if the rest of the taxpayers
in the US paid my living expenses while I saved towards that
goal. Please let me know how you anticipate paying your
share.

Phoebe

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There are a lot of people out there who worked hard their
whole life and their greatest asset is their house. If they
live a long life and their medical costs exceed their means,
it is a sad day for them to be left with nothing. It does
not take long for medical costs to eat up their life
savings. I think people want the satisfaction of knowing
they are able to leave their heirs something.

Andy writes:

Well, yes, but to expect "me", and the rest of the
taxpayers, to pay someone's medical bills when they have a
net worth of several hundred thousand dollars is not
realistic either.

If a person want to give away their property to their
children before they have incurred any debts to someone, it
is their right to do so..... But to expect to give away
their property AFTER they have run up tens or hundreds of
thousand dollars in bills is not realistic.

However, there is NOTHING wrong with using existing laws to
one's best advantage, whether it is morally correct or not.
As long as

laws permit one to get out of paying one's bills, I, and
everyone else who is able to , will use these laws.......
without an attack of conscience.

So now you know what sort of person I am. I have a lot of
company.

......... but that's just my legal opinion.

Andy

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I made an editing error in my original post. To get a free
step-up in basis for assets owned at death does NOT require
any residency. The requirment of living in the house for 2
of the past 5 years applies only on a sale of the house by
the owner/occupant.

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Of course one's choice to do Medicaid Planning is a personal
choice, but Medicaid Planning is legitimate. Congress has
yet to shut down such planning.

There are a lot of people out there who worked hard their
whole life and their greatest asset is their house. If they
live a long life and their medical costs exceed their means,
it is a sad day for them to be left with nothing. It does
not take long for medical costs to eat up their life
savings. I think people want the satisfaction of knowing
they are able to leave their heirs something.

I don't think there is anything wrong with using one's brain
to make the best out of what assets a person has. Planning
is not only for the rich. Thanks for helping to draw out a
thorough discussion of the topic.

Jennifer

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MTW wrote:
- quote -

The OP agrees:
- quote -

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best_scrivener[at]yahoo.com wrote:

- quote -

You say that as if there is something ~wrong~ with the notion
that people should pay for the care that they receive.

As JFK used to say, "Ask NOT what your country can do for you..."

MTW

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- quote -

SNIP

- quote -

I suggest you see an attorney who does estate planning in
your mother's area. There are many ways to solve your
problem but how to title real estate is a legal issue in
most states.

From a tax standpoint it is preferable to keep the property
in your mother's name to preserve the exemption for personal
residence and/or the step up in basis at death. There may be
transfer on death provisions to allow the house to escape
probate but that depends on state law. If an attorney did
the counseling I would ask her or him about the tax
consequences of each option for both sale while your mother
lives and sale after death.

Also, depending on the state you are in the probate
ramifications may not be that dire.

Martha Matthews, EA

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A poster wrote:
If we knew how things were going to play out in the years to
come it might be a more obvious decision, and I think (2)
would win out. But what we are struggling with is she is now
starting to question how long she might be able to stay in
the house on her own, and may need to "sell it and move into
an independant living facility".

Andy writes:

If she does a "quit claim with life estate", and the new
deed is on file with the tax assessor, it can be sold
without going thru probate. ( The value of the asset is
still part of her estate for Federal purposes, so that stays
the same).

A "quit claim" can be revoked if all the parties agree.
Effectively , what happens, is that the grantees from the
original paper then "quit claim" it back to the grantor.
Since it has the later date on it, the original "quit
claim" is nullified. In other words, a gift was given, and
then later the gift was given back....... A lawyer should
be used for both procedures, to make sure all the bases have
been covered and the new deed has been filed properly.

This is pretty good if the all the grantees have the
interests of the grantor in mind. Not a good idea if the
grantees are out for alll they can get, since any of them
can refuse to give the property back..... It is also very
very very good if the grantor becomes demented or goes
nutso, and starts cutting everyone out of his/her will
because of mental deterioration. Then the grantees can just
refuse to change it..........

Some states treat this differently than others, however.
The advice I have giver works pretty well for Florida.....

Andy

PS... The medicaid "lookback" period is 3 years for many
states. A "quitclaim" further back than this effectively
eliminates the property from the assets which are looked at
for Medicaid eligibility. That law may be changing, however.....

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If she dies owning the house (and living it for at least 2
of the past 5 years, her heirs enjoy a free step up in
basis, eiliminating any gain. Of course this might
increase her Federal Estate Tax.

If she sells she gets a $250,000 exemption on the gain if
she has lived in the house for 2 of the prior 5 years.

Under present Federal Tax law, the combinatrion of the
above would precude the advisability of putting anyone else
on the title, or other measures you mention.

As for Probate, that depends on her state of residence but
what about her other assets? She can avoid Probate anywhere
by putting the title to the house and her other property in
a Living Trust. This does not disturb her Homestead
annd/or over age 65 property tax exemptions. It has some
added advantages and "generally" raplaces her will as to
directions to her heirs.

ed

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bp wrote:

- quote -

Either is a reasonable plan, except that if mom goes to an
assisted living facility the house cannot be sold because of
the 'life estate' condition. The money might be needed to
pay for her care. If this occurs, she can write a discharge
of the 'life estate' to permit the sale of the house.

Putting other names on the deed is equivalent to a gift, but
the downside is that if the house is sold to pay for her
care, then the sons are liable for the capital gains taxes
to some degree.

Another approach (needing a lawyer) is to set up an
irrevocable trust: the house is then put in the trust name
and the trust document spells out all the possible
contingencies and outcomes as you wish.

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"bp" <billprew[at]gmail.com> wrote:

- quote -

You need to say what the house is worth and whether it plus
other assets exceeds the lifetime exemption she has. If you
are only worried about estate tax and/or probation
costs/delays, especially if the remaining kids are natural
(ie, theres been no divorced), it might be best to leave it
in her name. That way, current tax law would give you a
stepup in basis when she dies. If she may need Medicaid
assistance, find out how much of the value of the house is
exempt to qualify. In several states it is totally
exempt.....we still need more info.

Mike Lewis, CPA

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"bp" <billprew[at]gmail.com> wrote:

- quote -

This isn't a tax problem, it's a legal problem. But I'll
tackle it anyway if the Moderator doesn't mind.

While these options both avoid probate on the house, both
have problems. In the first, after your mother dies the
kids will likely pay more income tax on the sale of the
house than they would if they didn't do it this way. In
addition, any of then could prevent the sale of the house in
case your mother needs to sell it to pay her expenses.

In the second option, any the sons will also be able to
prevent the sale. In both cases a gift tax return should be
filed.

The better way is to put the house into a living trust.
Your mother will has complete control and can sell it
without anybody's permission. But after she dies the kids
won't lose the tax benefit of stepped up basis when they
sell.

Stu

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- quote -

If avoiding probate is your only concern, consider forming a
"revocable living trust" to hold the home (and possibly
other assets). Mom retains full control so long as she is
alive. Sons have no interest in the home until her death,
but that interest will pass outside of probate.

A good source for self-help information on this and other
estate planning issues is: www.nolo.com

MTW

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You and your family should be thinking about Medicaid
Planning. If your mom requires extensive medical care
and she receives medicaid, the gov't can seek
reimbursement from her assets, i.e., her house. Yes,
they can take her house to be reimbursed for the cost
of her care. You might want to check out this article
for an FYI

http://www.elderlawalliance.com/medicaid_faq.asp

While she is in decent health is the time to think about
planning. Some lawyers suggest transferring the house
to an Limited Liability Company (LLC) and granting her
heirs (sons) a membership interest in the LLC. Then when
she dies, her interests are not subject to probate.

It is smart of you to ask a group like this for guidance!
Good luck!

Jennifer

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My mom is a widow, and currently is the only name on the
deed of her house. She has living sons, and we are wondering
about what measures we should take to prepare for the
future.

We have been counseled to look at two options, (1) just
adding the sons name to the deed in addition to hers, or (2)
putting the house in the names of the sons and granting mom
a "life estate" to it.

If we knew how things were going to play out in the years to
come it might be a more obvious decision, and I think (2)
would win out. But what we are struggling with is she is now
starting to question how long she might be able to stay in
the house on her own, and may need to "sell it and move into
an independant living facility". Under that scenarior I am
not sure if either (1) or (2) makes sense, or what the pros
and cons to each would be. We certainly wouldn't want the
sons to be taxed on a portion of that sale, the proceeds of
which will be used to fund her care.

We aren't trying to hide her assets from the covernment for
medicaid purposes, she's fine with using th wealth she has
accumulated for that purpose.

So we're trying to balance avoiding probabte and an easy
transition of assets if needed, against paying more in taxes
or fees if she decides to sell and it is not solely in her
name. Any advice or links would be appreciated.

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