One of the most significant financial decisions you can make is transferring the ownership of your home to another person. It may seem like a simple process, but it can have consequences you may not have thought of. Transferring ownership of your house to someone without professional estate planning is not a wise decision. Continue reading to learn why it is not smart to sign your house over to someone without professional estate planning.
What to Consider When Transferring Ownership of Your Home
Loss of Control
When you sign your house over to someone, you are essentially giving up control of your property. Even though you may still be living in the house, you will no longer have the legal right to make decisions about it. The person to whom you transferred the ownership will have complete control over the property, including the right to sell it, lease it, or make any modifications to it. While you hopefully trust the person you are signing the house over to, this leaves you vulnerable in case that relationship were to sour.
Potential for Financial Exploitation
Transferring ownership of your house to someone without proper estate planning increases the potential for financial exploitation. It can lead to various complications and legal disputes, including situations where the transferee has a financial motive, such as selling the property or using it as collateral to borrow money. You can basically be kicked out of your home, even if the agreement was for you to still live there. By giving up the rights, you are no longer in control of those decisions. Without having professional estate planning and specific documents to outline the terms of your agreements, you leave yourself unprotected from potential conflict.
Transferring ownership of your house to someone without professional estate planning can have significant tax consequences. If you transfer your property to someone, you may be liable for gift tax, capital gains tax, or both. Moreover, if the transfer occurs during your lifetime, the value of the property will be included in your estate, which may increase your estate tax liability. Consult with an estate planning professional in your area to ensure you are going the best route financially for you and your loved ones.
Another reason why you need professional estate planning is to protect your Medicaid eligibility. If you require long-term care in a nursing home or assisted living facility, you may need to rely on Medicaid to pay for it. However, transferring ownership of your house to someone without professional estate planning can make you ineligible for Medicaid. Medicaid has a five-year “lookback period” during which any transfer of assets, including your home, will be scrutinized to ensure that you are not attempting to qualify for Medicaid by giving away your assets.
Transferring ownership of your house to someone without proper estate planning can also create family conflicts. If you transfer your property to one child or family member, it can lead to resentment among other family members who feel excluded. It may also lead to legal disputes if the transfer is perceived as unfair or if there are questions about the mental capacity of the person making the transfer.
So, what can you do to avoid these potential problems? The answer is professional estate planning. A qualified estate planning attorney can help you develop a comprehensive plan that meets your individual needs and goals. They can help you create a trust that allows you to retain control of your property while still transferring ownership to someone else. They can also help you navigate the complex tax and Medicaid eligibility rules to minimize your tax liability and ensure that you can qualify for Medicaid if you need it.
If you’re in Illinois or Wisconsin and aren’t sure how to pass on your home, let us help. Contact us for a consultation and let us set you on the right path to protecting yourself and your loved ones.
Disclaimer: This article is intended to serve as a general summary of the issues outlined therein. While this article may include general guidance, it is not intended as, nor is a substitute for, qualified legal advice. Your review or receipt of this article by Lexern Law Offices, Ltd. (the “LLG”) or any of its attorneys does not create an attorney-client relationship between you and the LLG. The opinions expressed in this article are those of the authors of the article and does not reflect the opinion of the LLG.