por Kristen Ishihara y Chris Parker de Ishihara & Parker Law Firm PLLC

If you’re thinking about signing over your house to your kids to protect it from Medicaid or avoid estate recovery, hold up! While it might seem like a good idea at first, there are some serious financial and legal pitfalls that could cause more harm than good. Let’s break it down.

The Medicaid Estate Recovery Trap

A lot of people worry about Medicaid taking their home after they pass, so they think the best solution is to transfer it to their children while they’re still alive. The problem? This can actually backfire in a few ways:

1. The Five-Year Lookback Rule – Medicaid has a rule that looks at any major asset transfers made within five years of applying for benefits. If you give your home away, it could make you ineligible for Medicaid for a certain period of time.
2. Loss of Control – The moment you transfer your home, it’s no longer yours. If you and your child have a falling out, or if they face financial trouble, that house isn’t protected anymore.
3. Tax Issues – Your child could get hit with a big capital gains tax bill when they sell the house. If they inherit the home instead, they get a step-up in basis, which means much lower taxes.

A Better Alternative: The Lady Bird Deed

Instead of giving your house away, consider a Lady Bird Deed (also called an enhanced life estate deed). This legal tool allows you to:

• Stay in control of your home for life.
• Avoid probate when you pass away.
• Keep the house safe from Medicaid estate recovery.
• Let your heirs inherit the house with fewer tax consequences.

It’s an easy and effective way to protect your home without all the downsides of outright gifting it.

Lo esencial

Estate planning isn’t just about dodging Medicaid—it’s about making sure your assets are protected while keeping things simple for your loved ones. Instead of making risky moves, talk to an estate planning attorney and explore safer options like a Lady Bird Deed.

You worked hard for your home—make sure it stays protected the right way!

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