We get this question at least once a week in the offices at Bellomo & Associates. Unfortunately, like other areas of estate planning and elder law, the answer varies from situation to situation.
The way that I explained this concept is very similar to physics; For every action there is an equal and opposite reaction.
Anybody who has been through one of my workshops or seen me present knows that I always do a concept called “The Three Secrets to Protecting Your Legacy to Protecting Your Legacy”. The first land, on the far-left corner of the room is Tax Land. The middle of the room is Long-Term Care Land. The far right-hand corner of the room is Estate Planning Land.
In Estate Planning Land land, we all know that we want to control our property while we are healthy and plan for our loved ones if we become disabled.
When in Tax Land, putting a child's name on the house will avoid probate. In Pennsylvania, as long as the child has the property for more than one year in their name prior to the person's death, it will avoid probate, also will avoid state inheritance tax.
If the child's name is on the house, even if they don't make it a year, they will still avoid probate even though they will have to pay Pennsylvania inheritance tax. However, there is so much more that has to go into this decision – don’t forget Long-Term Care Land!
Yes, we can make this transfer from a tax perspective in Tax Land. However, what are we going to do if the person ends up falling ill and needs long-term care – Long-Term Care Land?
There is a five-year look-back period if a person is trying to qualify for public assistance under the Medicare program; if the transfer was made within five years of applying for Medicaid, then the transferor is penalized. Also, what if the child ended up getting divorced, entered a nursing home or was in a car accident? That would create other problems.
These scenarios are very common in our practice, but often are under-estimated. If you have ever had thoughts of transferring a property to a child, please seek the assistance of an elder law attorney to answer the questions in all three Lands to see it if makes sense.
And please join us for any one of our upcoming workshops. It's free and worth every bit of your time. Just click here, then RSVP for the date and time what works best for you!
