For prior generations, keeping the house protected from a nursing home seemed as easy as deeding it to the kids and calling it a day. In today’s world, putting your house in your kids’ names might more accurately be described as “going from frying pan to fire”. Adult children today face unprecedented financial challenges and exposures: a historically high divorce rate, financial aid concerns with educating their own children, an increasingly aggressive set of tax laws, and various lifestyle concerns from addiction to creditor problems. A child can also predecease you, leaving the ownership of your home in someone else’s hands – perhaps an in-law or a grandchild. Even under the best of circumstances, your child can still face an unexpected capital gains tax hit when the home is sold during your life or after your death.
Putting ownership of your home into the right kind of trust offers all the protections of getting the house out of your ownership – and away from nursing home exposures – without the many downsides of putting it into someone else’s name. With a properly designed trust, you can still control who serves as trustee and change your mind about the future beneficiaries upon your death. The house can remain your asset for tax purposes, providing a shelter from capital gains during your life and upon your death. You can receive rental income on real estate as well as interest/dividends on investments while still protecting the assets themselves. Most importantly, you don’t have to worry about unintended risks to your home because the trust should be designed to insulate the property during your life from any financial pitfalls your children may encounter.
The choice seems clear, but a discussion with an EPLO attorney can help you navigate your own unique situation to be sure you’re making the right decision to protect yourself and your family.