Bad Plan

Putting your house in your kid's name, it seems like a good plan to avoid the nursing home getting it, to avoid probate, but it's not, and I'll tell you why. You are going to continue living in the home, but it's going to be in your child's name. So yes, if you can do that for 5 years, then you've avoided Medicaid. Medicaid will have no claim to that house. But what if your child gets sued? What if your child gets divorced and an ex-spouse gets a sizable award? You're going to be giving up part or all of that house. And the same thing applies if you do that for purposes of getting around probate. When you die, you are exposed to your child's liabilities. Now you say, Jerry Taylor, I've got a great kid. Those things would never happen. But the idea is that you want to minimize the risk. You want to do away with that risk if you can, and there are better options available. And if that doesn't convince you, consider the tax consequences. If you put your home in your child's name, they will not get the step-up in basis when they sell the home. They will have to pay capital gains tax on the difference in the value in the home from when you bought it to when they are selling it. Depending on what state you live in, there are several other options available to avoid all of that, but one of the best is a living trust. You put that home into a living trust. When you die, the home passes to your child outside of probate, completely outside of court, and they receive the step-up in basis. Will not pay capital gains tax on that difference in valuation.