Real Estate - Protecting Parents' Assets

Q. My elderly parents own a home valued around $100,000. How best can I help them protect this asset prior to the possibility of both going into a nursing home or passing away? Should they quit claim the house to me or put me on the deed? Would one option be less costly in taxes? Thank you.

A. If they quit claim the house to you it will be considered a gift and you will inherit their cost basis. Since it is over $11,000 per year per person gift limit, they would have to file a form (706 or 709) with their taxes which basically says, "Consider the excess amount of our gift as part of our $1 million lifetime gift exemption."

You would then be responsible for paying capital gains taxes on it when sold based on their cost basis plus any improvements.

If the transfer occurs within 3 years of applying for Medicaid, then Medicaid would withhold payments for the period of time the value of the asset transferred would have paid for.

If the apply for Medicaid after 3 years then that wouldn't be the case.

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