Under the laws of most states, when you transfer your house to a child or anyone else, you enter into a Medicaid penalty period, barring your eligibility for Medicaid for a period of time. A way to avoid the penalty period is for the Medicaid applicant to transfer the house to a child considered to be his or her “caretaker.”
A caretaker child is defined as a child who lived in the applicant’s house for at least two years before the applicant moved to a nursing home and who cared for the applicant during that time in such a way that he or she could avoid moving to a nursing home. The rule applies only to a child, not to another support person.
What you need to do to prove the child has lived with the parent and cared for the parent in the manner required varies from state to state. For that reason, it’s important to contact an attorney before making any sort of transfer.
You may transfer your home to the following entities and avoid the penalty period:
- A child under age 21 who is disabled or blind.
- Your spouse.
- A trust for the benefit of a disabled person under age 65. Under certain circumstances, it’s OK if the applicant is the beneficiary of the trust.
- A sibling who, during the prior year, had lived in the house and has an equity interest in it.
Should you leave siblings unequal shares of your estate?
When you’re reviewing your estate plan, it’s important to think about how to divide your estate among your children.While you don’t need to leave siblings equal shares, be aware that inheriting unequal amounts can cause arguments among children after you pass.
To avoid disagreements from the get-go, you may want to leave your children equal shares.
If that is your goal, remember to consider any property or accounts you hold jointly with each child. Jointly held property or money passes outside of your estate. That means if you have listed a child as a caregiver on a bank account, or you jointly hold property with one child, it will pass to that child alone at your death. The same rule applies for a “pay on death” account.
If you don’t want one of your children to get a bigger share of your estate, be sure to add a provision in your estate plan indicating that property passing to one child through joint tenancy is an advancement of that child’s share.
You can also choose to leave each child a different share. Perhaps one child has a disability and requires more for the future, or maybe you want to give a bigger share to a child who serves as your caregiver.
If you choose to give different amounts, include a provision in your estate plan explaining the reason for your choice. Make it clear that the choice was yours, not the decision of the child receiving the larger share. The more clearly you can explain yourself in advance and in your documents, the better. Otherwise, one of your children could attempt to challenge your will.
Work with an estate-planning attorney to decide how to handle dividing an estate and to determine any needed provisions.