Transferring property to a child or other relative can be tricky business. Essentially, houses and other property are valuable assets, and if there is a chance you may be applying for Medicaid, some people think they can get around these penalties by selling their house for a dollar. However, this strategy can lead to a number of problems for you or your family members.

The Gift Tax and Real Estate Sales

While it may seem like you are clearing a big asset off your books by selling it to your child, the tax burden will be kept in the family.

For one, the IRS is will not recognize the transaction as a legitimate sale, and you may still be subject to either a gift or estate tax. If you sell your house for $1, the IRS will not consider this a sale, but instead a gift. So, for example, if your house is valued at $300,000 and your child buys it for $1, it is considered a gift in the amount of $299,999. You would be on the hook to pay a gift tax on the majority of this value if your estate is otherwise large enough to owe gift/estate taxes.

If after selling your house to your child for $1, they decide to sell it at fair market value, they will have to pay a capital gains tax on the property. Since the initial transfer to your child would be considered a gift, the tax basis for the property would be based on the amount that you initially purchased the house for plus the cost of any improvements – known as the adjusted basis.  Say you bought your house for $50,000 and made no improvements, and your child sells it for $300,000 after buying it for $1. They would pay capital gains taxes on the $249,999 difference.  Anytime you gift property, the donee gets a carryover basis.

How a Sale Could Affect Medicaid Application

Almost more importantly is the question of how selling your house for $1 could affect your ability to qualify for Medicaid in the future. If you sell your house to your child for $1 to try to spend down your assets, and then apply for Medicaid within 5-years of that transaction, you will incur a penalty that will keep you from receiving Medicaid benefits for many months when you otherwise might have received those benefits.

The bottom line is that there is no way to fully avoid paying taxes when it comes to transferring valuable properties, such as a house, to your loved ones. By working with an experienced estate planning attorney, however, you will be able to minimize the tax burden that you or your loved ones will have to pay.

Contact Miller Estate and Elder Law

At Miller Estate and Elder Law, we have many years of experience when it comes to helping people strategically transfer property to their children and loved one. To find out more, do not hesitate to give us a call at (256) 251-2137 or contact us via the brief form below.

Deciding when it’s time to consider a memory care facility for a loved one with dementia is not easy. Not only is this an emotionally charged subject liable to trigger family conflict, but there is no single set of criteria available to guide your decision. Dementia arrives in stages, but no two cases are the same—and every family has different needs.

Whether memory care for dementia is appropriate for your loved one depends on many factors—but it’s not a subject you can ignore. To assess whether it is time for your loved one to enter a memory care facility, ask yourself the following questions:

1. Have friends or family members commented on changes in their behavior?
2. Does your loved one often become agitated or combative?
3. Is your aging relative withdrawn or nervous?
4. Are their hygiene needs met?
5. Does your loved one wander?
6. Are their living conditions safe?
7. Are their medications properly managed?
8. Is your loved one well-nourished?
9. Have you started to feel caregiver burnout?
10. Is caring for your loved one going well?
11. Are you feeling resentful towards them?
12. Is caregiving affecting your own health?
13. Are you and your family safe?

Subtle changes in behavior are often the first sign that a loved one will soon need memory care, though these changes can be hard for family members to pick up on. Furthermore, aggression and agitation can be dangerous signs of dementia, especially when that person is being cared for by an elderly spouse. Changes in hygiene, wandering off, and the inability to navigate their living conditions can also be signs that a loved one needs additional assistance. Finally, caregiver burnout is a common problem when caring for someone with dementia, and it can have serious physical and emotional consequences—both for the caregiver, and the patient).

Addressing the need for memory care for dementia is not just a medical matter, but a legal one, too. Getting the right legal documents in place early can save a lot of time, money, and aggravation when dementia becomes a bigger issue later.

A failing memory can complicate the estate planning in countless ways. If your aging loved ones are showing signs of dementia, please consider it an urgent matter that demands immediate attention. To learn more about what you need to do (and how to do it), download our free Living with Dementia e-Book using the brief form below, or reach out to Miller Estate and Elder Law to request a free consultation today.

At Miller Estate & Elder Law, we have decades of experience helping our clients with every aspect of estate planning and elder law. We’ve seen every mistake in the book, and are here to make sure you don’t make any of them! Give us a call today at (256) 251-2137 or use the contact form below.