protecting a home

sooeyApril 16, 2006

Hi Gang,

I am about to inherit a home from the estate of a family member. If all goes according to plan it will become our primary residance within a year - 18 months. My husband and I are semi-retired, 56 & 58. We have enough in pension and securities to see us through into our golden years. The home I will inherit is a small 'family home' that I would like to pass on to my children when both my husband and I are gone. It's current value is about $400.000. Is there a way to protect it from ever being sold to pay for unforseen medical expensise that my husband or I should be faced with, ie long term care for one of us? As it stands right now, all that is covered but since we don't know how long we will live or what the cost of long term care will be in the future, it seems like a bit of a crap shoot.

I have thought of putting the house directly into my childrens names, ages 24 & 28, with the understanding that my husband and I will live in it, cover taxes, repairs, improvments, etc. I was thinking of a Trust of some type. Can any of you tell me of the pitt falls, legalities, etc of doing that?

I will be discussing this all with an attny when the estate is final but, I am in need of some background info so I know what is possible, as well as what questions I should be asking and what direction, if any, I should be going in.

Any advice out there? Thank you.


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Dear Sooey,
Don't put your children's name on the title. You can't predict the future. Suppose one child divorced, and the former spouse demanded a portion of the house as part of the settlement. He or she could force the sale of the house, and there would be absolutely nothing you could do about it. In addition, there are negative tax consequences to giving a house to your children as opposed to letting them inherit. An heir inherits a house at a stepped up value; this really reduces capital gains if that heir then sells the house down the road. If you give the house to your children and they are forced to sell in the future, they could wind up having to pay large capital gains taxes.

Finally, consider the following scenario. Your DH has a stroke and needs round the clock care. You want to put him in a good facility where he will receive the best care available, but you can't sell the house to cover the expense. You can't get a reverse mortgage to raise money either because you no longer own the house. And so you have to put DH in a third rate nursing home whose only advantage is that - unlike the good facility - it accepts Medicaid.

    Bookmark   April 16, 2006 at 4:50PM
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You need to see a lawyer who specializes in ELDER law and estate planning! It is a relatively painless process and not terrifically expensive; but you have be willing to sit down, LISTEN, and hash out the pros and cons.

This is what we did for Mum: she is elderly, frail, and has liquid assets to cover the need for nursing home care for a few years should that become necessary. Her real estate holdings have been put in a trust, the contents of her home have been distributed between my brother and I. At this time, she lives with me, going to my brother when I need some respite.

I don't know what the premiums are for someone the age of you and your husband, but you might be wise to look into long term care insurance, too. This would cover the possibility of unpredictable tragedy. Perhaps you could have the earnings of an investment diverted to pay for them, and they may be a deductible expense... I don't know.

Consider this: this country is going to see the greatest transfer or real and liquid assets EVER in the next few years. The state of the country's finances being what they are, they gov't. is going to make a move to appropriate some of it. Protect it now! the laws are changing and changing quickly... and most Americans of relatively modest means are blissfully unaware of it. Mum sure as hell was!

A skilled estate lawyer, CPA, and financial planner are your best friends and worth every dime they earn.

    Bookmark   April 17, 2006 at 7:57AM
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The home I will inherit is a small 'family home' that I would like to pass on to my children when both my husband and I are gone. It's current value is about $400.000. Is there a way to protect it from ever being sold to pay for unforseen medical expensise that my husband or I should be faced with, ie long term care for one of us?

The way to do that is to arrange for your own savings and/or insurance to pay for those unforeseen expenses. Medical care or long-term care has to be paid by someone and it's only fair to have people use their own assets before others have to step in and pay.

    Bookmark   April 17, 2006 at 9:45AM
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Hi Kids,

Thanks kaleberg & chelone.

Yes, I had thought of the possible divorce issue of one of my kids in the future. We would never like to think of that but, we must consider it a possibility. That risk and a few others, is why I was wondering about the safety of a Trust.

You both have given me some direction and some ideas. I know a disucssion with a good Estate attny is in our future. I know the process is not painful, just a little time consuming. It seems strange to be going throught this.

I know we are blessed to be in this situation. But I also know that we need to be responsible, think about our future and to have a good plan. We also need to be flexable enough to change or add to our financial plan as needed.

Thanks, Kids.


    Bookmark   April 17, 2006 at 9:55AM
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Sooey, having recently been through this whole thing with Mum's affairs, we are now scheduling a "sit down" with an estate attorney to reassess our own situation. It doesn't take much time for assets to really grow and gain value and quickly outstrip the ceiling that defines basic inheritance law. And all you have to do is inherit something and the value of your OWN estate increases markedly and it's time to "reassess". The appreciation of real estate value in my area has really driven the increase in "value".

With respect to funding long term care... BIG issue for people like me. I've been DOING IT, providing "elder care" IN HOUSE, for 3 years now. It's 24/7/365 days a year. I take care of TWO sets of "books" and bills every month. I am the "cruise director"... scheduling all required appointments, dealing with Social Security, Medicare partD, and a host of other responsibilites. I do it with grace, good humor, and more attention to detail than any nursing home/social worker I've seen does (and I've seen more than a few). Care of my elderly mother eats up a large portion of what used to be "free" time; I can't take off for weekend with the helpmeet. Even going out for dinner presents a challenge (feed her, get her ready for bed and then check to make sure she's OK when we return), I can't "sneak out" first thing for fear she'll awaken, ALONE and afraid in an empty house; she is a "toddler" with the faculties and sensibilities of an adult. This is an unpaid service... I am permitted no exemption for the added expense of having her here (unlike parents of minor children), nor am I permitted more than the 11K/year "gift", without being required to decare it as "income". And, if I take the 11K gift, there is that much less to fund nursing home care IF she needs it; there are no "easy" choices. Try finding a nursing home that will do as much, as assiduously for that level of remuneration... AND do it as well as I do on a daily basis. I understand that much of the ill will about isolating assets isn't directed to people like me or Sooey... more toward those who COULD offer care to an elderly parent but prefer/refuse to offer anything and STILL want to "skim the cream". Sadly, there doesn't appear to be a way to identify the "soldiers" from the "looters".

I see NOTHING wrong with using the code of laws in our country to secure and isolate assets as a form of deferred payment for my years of devoted care to a feeble, ailing parent. As I see it, I've already saved the system a lot of money; Mum has met the basic criteria for nursing home care for years now... she can't remember and complete 3 very basic tasks if given to her at one time. She is unreliable with respect to toileting, and she is no longer capable of bathing by herself. She cannot manage her finances or take care of the daily realities of independent living. It is my sincerest hope that she dies peacefully in her own bed, right here in my home. It's what we all hope for own ends, afterall.

But the time and effort we've made to keep her safe, comfortable, and HAPPY deserves to be compensated, too. Much of the "safety net" that she now enjoys will NOT be there for me when I'll be most in need. Make no mistake about it, I'll be using every legal means within my grasp to secure my OWN future because even as we fund the very services of which Mum presently avails herself the reality is they WON'T be there for us at the present rate. Both my parents would be proud of my brother and me for our foresight; my father was horrified when he realized what a poor job he'd done planning for Mum when his own death became imminent. When the wealthy do this it's considered "smart", "shrewd"... when the workaday slobs start "wisin' up" it becomes "greedy", "self-serving", even "sleazy". I don't see it that way, at all, but again, I come at this from a different perspective. And I think it's important to bring these things up and present the other side of the coin for examination.

Sooey, your children will thank you endlessly after you're gone! You have to trust me on this one. I KNOW, firsthand, just how much work is required to straighten out a parent's estate that has been permitted become "overgrown". It has taken hours, patience, a sense of humor, and more than a few sleepless nights. You are SO smart to deal with now.

    Bookmark   April 17, 2006 at 1:34PM
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I got it, I got it! I think, you are looking for something called an irrevocable trust. I believe they would need to put the home in an irrevokable trust. That is different from a family trust. I mention irrevocable since it can't be taken in the event of a lawsuit since you don't own it. I would never share any assets with my children since that simple act opens up my property to a lawsuit of any kind from their activities as well. There are plenty of ways to share without the risk. Good Luck and yep you'll want a good attorney to help work this through.

    Bookmark   April 21, 2006 at 12:00PM
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That is precisely what we set up for Mum. It was the most effective option available to us.

    Bookmark   April 21, 2006 at 4:27PM
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Thanks Happy, I'll ask the attny about an 'irrevocable trust'. I'll need to ask a ton of questions if and before we take that step. Four years ago, my Mom set up a 'revocable trust' with all of her assets and named herself as the trustee. Just going throught that process with her was an education and well worth the time it took. After all the meetings with attnys, doing all the leg work, signing all the papers, etc. We knew exactly how much there was and exactly where it was held.

chelone, I agree with everything you have said. Making a plan for our future is the most responsible thing we can do, for ourselves and our children. It's difficult to know what the future holds, how much we will need for our elder care as well as trying to think of what that process will be. We all need to plan and to plan well.

Thanks, Kids.


    Bookmark   April 22, 2006 at 9:50AM
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Thirty yearsago I lived with a lovely old lady whom everyone in the village loved - I don't think that I ever heard her say something nasty about anyone.

She had a friend who gave her house to her kids and was to live with them.

She lived with them for a while.

Before long she was on the street.

Night, night - library'sclosing

olre joyful he

    Bookmark   April 25, 2006 at 8:58PM
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Chelone -

You don't list your mom as a dependent on your tax return? I'm pretty sure that if you are providing all of her care, you can - I believe my mom lists my grandmother as a dependent on her return. Have you asked your accountant about that?

    Bookmark   April 26, 2006 at 9:21AM
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Get a book or two from your local library to read up on the subject. Look for subjects like estate planning, trusts, or financial planning. These didn't take the place of an attorney when we went through this process with my MIL, but they did make it much easier for us to understand things when we did meet with the attorney.

    Bookmark   May 2, 2006 at 4:08PM
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