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Chapter 13. Medicaid > Protecting the Home

Protecting the Home

In addition to the exempt transfers of giving your home to a community spouse, an equity-holding brother or sister, or a caretaker child, all as discussed above, you also may wish to protect your home by giving the home to your children with or without reserving a life estate. If you are planning early enough, the three-year look-back period should not pose a problem. Some states fully recognize life estates while others do not. The advantage of retaining a life estate when you give away your home in those states that permit such a technique is that the value of what you are giving away when you retain a life estate is less than if you gave away a complete interest in the home. Therefore, there may be a disqualification of less than three years as a result of the gift. The reason is that when you retain a life estate interest, you are giving away an interest in the home to the people for whom the full benefit of the gift does not take effect until you die.

This putting off of possession of the property allows you to value what you are giving away in accordance with IRS charts based upon your age at the time you make the gift. For example, if a person who is seventy-five years old gave away a life estate interest in his home, according to the IRS table, the value of the gift is only 43% of the value of the house. So for example, if the house given away was in Massachusetts and worth $200,000, the disqualification period would be 31 months, but if that same house was given away by a seventy-five-year-old Massachusetts resident, subject to a life estate, the disqualification would only be 13 months. The savings would be increased even further if, as can be done in many states, the starting point for the home’s valuation is not its fair market value, but rather the assessed value, which is often considerably lower.


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