• Skip to navigation
  • Skip to main content
  • Skip to primary sidebar
  • Skip to footer

American Academy of Estate Planning Attorneys

AAEPA, Inc

Find a Member Member's Login
Call Today (800) 846-1555
  • Membership
    • Membership Membership
    • submenu
      • Why Join?
      • Member Requirements
      • Become A Member
      • Meet the Team
  • Estate planning software
  • Education
  • Practice management
    • Practice management Practice Management
    • submenu
      • 11 Essential Systems
      • Coaching
      • Law Firm Marketing
  • Resources
    • Resources Resources
    • submenu
      • Live Training
      • Blog
  • Contact Us

How To Plan For The Home The Right Way

Home » Estate Planning » How To Plan For The Home The Right Way

This week I’m sharing a blog on Medicaid from Dave Zumpano, who focuses in Medicaid planning. I’ll be sharing Medicaid blogs from Dave Zumpano monthly in this space.
Now, here’s Dave’s blog:
Blog Author: David J. Zumpano, Esq, CPA, Co-founder Lawyers With Purpose, Founder and Senior Partner of Estate Planning Law Center
A major question comes up often during estate planning for seniors in determining what to do with the primary residence. There are many choices, but the actual selection will depend heavily on the ultimate goal of the client. Typical client goals include basic estate planning, probate avoidance, home management in the event of incompetency, benefits planning (Medicaid/VA), asset protection planning, and estate and income tax planning. Let’s review strategies in each of these situations.
The most common form of ownership of the primary residence by a husband and wife is as tenants by the entirety or similar legal ownership. By state law, this provides asset protection during life as 100 percent of the property will convey to the surviving spouse without any liens attached by a deceased spouse’s liabilities. Obviously for single individuals no asset protection is provided and non-spousal joint tenancy may protect the assets for the surviving joint tenant, subject only to Medicaid and IRS’s right to recovery. The most typical funding strategy is to transfer the primary residence to a revocable living trust (RLT) to avoid probate. Some states also allow payable-on-death deeds (ladybird deeds) or heirship deeds. While funding the home to a revocable trust or these other strategies avoid probate and could provide post death asset protection (RLT), they do not effectively provide protection “during life”.
Another primary strategy is to convey the home to an irrevocable trust. These are typically done when clients are interested in estate tax savings or asset protection. The primary question relates to whether the irrevocable trust is a “grantor trust” or a “non-grantor trust” for tax purposes. Traditionally, estate tax reduction trusts are non-grantor trusts and the home would maintain its “carry over tax basis” to the beneficiaries of the trust thereby creating a capital gains tax on the difference between the sales value and the original price paid by the grantor who conveyed it to the trust. In contrast, a grantor trust that retains rights that include the value of the irrevocable trust in the estate of the deceased grantor, would receive a “step up” in basis after the death of the grantor. While these serve estate and income tax needs, they often may conflict with benefits planning, such as for Medicaid and/or veterans’ benefits. In addition, one must be cautious in conveying a principle residence to a RLT or irrevocable trust as it could defeat any real property tax exemptions. The client is eligible for when the property is owned in the client’s name. You need to confirm with your local assessor on the impact of the credits upon funding the home to the trust chosen.
Medicaid and veterans’ benefits, on the other hand, have additional restrictions above and beyond the tax and legal restrictions regarding trusts. Putting a personal residence in an irrevocable trust for Medicaid can provide asset protection during lifetime but doing so creates an uncompensated transfer which affects future eligibility. Another question in funding the personal residence is whether to retain a reserved life estate in the deed and convey the remainder to the trust or to convey the whole residence to the trust and maintain a right for the grantor to live there inside the trust document. This often avoids the loss of any real property tax credits but if the home is sold during the grantor’s lifetime, then the grantor’s pro rata ownership (lifetime interest) proceeds would be considered “available” in determining the grantor’s ongoing Medicaid eligibility.
In contrast to Medicaid planning, planning for VA benefits has additional considerations. A veteran can convey their home to an irrevocable “grantor” trust without consequence. The caution, however, is if the residence is sold during the grantor’s lifetime and converted to an income producing asset (cash, stocks, etc.) it would thereafter trigger the asset value in determining the veteran’s future benefit eligibility.
Planning for the home appears simple but is absolutely essential that the overall client goal is identified before determining where to fund the home. Understanding these strategies are essential.
Stephen C. Hartnett, J.D., LL.M.
Associate Director of Education
American Academy of Estate Planning Attorneys, Inc.
9444 Balboa Avenue, Suite 300
San Diego, California 92123
Phone: (800) 846-1555
www.aaepa.com

  • Author
  • Recent Posts
Steve Hartnett
Steve Hartnett
Director of Education, American Academy of Estate Planning Attorneys
Steve Hartnett
Latest posts by Steve Hartnett (see all)
  • Double Your Gifting with Spousal Gift-Splitting - January 11, 2022
  • Tax Planning for 2022 - December 28, 2021
  • Donor Advised Funds: Too Good to Be True? - August 10, 2021
SHARE

About Steve Hartnett

Director of Education, American Academy of Estate Planning Attorneys

Primary Sidebar

Subscribe to our blog

Recent Posts

  • Spring Summit 2022: Celebrating Friendship in the Lone Star State
  • Aging Parents and Estate Planning
  • How Do I Title Thee…Part I
  • Turning Stalled Out Goals into Actions
  • What Makes a Will or Trust Invalid

Categories

  • Academy Girl Friday (33)
  • Client Services (238)
  • Coaching (33)
  • Consumer Advantage (3)
  • Counseling (21)
  • Elder Law (5)
  • Estate Planning (921)
  • Estate Planning Documents (5)
  • Estate Planning Education (199)
  • Financial Analysis (3)
  • Financial Services (1)
  • General (19)
  • Law Firm Marketing (281)
  • Law Firm Net Revenue (7)
  • Law Firm Staffing (99)
  • Law Firm Technology (45)
  • Law Firm Web Tips (185)
  • Leadership (191)
  • Legal Education (646)
  • Marketing Tools (2)
  • Medicaid (1)
  • Member Services (1)
  • Owners Compensation (1)
  • Peak Performer Focus (1)
  • Practice Building Calls (1)
  • Practice Management (496)
  • SEO/Social Media Support (3)
  • Software (6)
  • Strategic Planning (9)
  • Uncategorized (15)

Footer

logo of American Academy of Estate Planning Attorneys

About Us

  • Meet the Team
  • Site Map
  • Legal Notice
  • Privacy Policy

Explore Our Services

  • Coaching
  • Estate planning software
  • Events
  • Legal education
  • Marketing
  • Web and SEO

Keep in Touch

Mon-Fri

9444 Balboa Ave. Suite 300

San Diego

(800) 846-1555

info@aaepa.com

Take Back Control of Your Business and Your Life

+

footer section | American Academy of Estate Planning Attorneys

© 2022 American Academy of Estate Planning Attorneys, Inc All rights reserved.

We use cookies on our website to give you the most relevant experience by remembering your preferences and repeat visits. By clicking “Accept All”, you consent to the use of ALL the cookies. However, you may visit "Cookie Settings" to provide a controlled consent. Don't sell my personal information.
Cookie Settings Accept All
Manage consent

Privacy Overview

This website uses cookies to improve your experience while you navigate through the website. Out of these, the cookies that are categorized as necessary are stored on your browser as they are essential for the working of basic functionalities of the website. We also use third-party cookies that help us analyze and understand how you use this website. These cookies will be stored in your browser only with your consent. You also have the option to opt-out of these cookies. But opting out of some of these cookies may affect your browsing experience.
Necessary
Always Enabled
Necessary cookies are absolutely essential for the website to function properly. These cookies ensure basic functionalities and security features of the website, anonymously.
CookieDurationDescription
cookielawinfo-checkbox-analytics11 monthsThis cookie is set by GDPR Cookie Consent plugin. The cookie is used to store the user consent for the cookies in the category "Analytics".
cookielawinfo-checkbox-functional11 monthsThe cookie is set by GDPR cookie consent to record the user consent for the cookies in the category "Functional".
cookielawinfo-checkbox-necessary11 monthsThis cookie is set by GDPR Cookie Consent plugin. The cookies is used to store the user consent for the cookies in the category "Necessary".
cookielawinfo-checkbox-others11 monthsThis cookie is set by GDPR Cookie Consent plugin. The cookie is used to store the user consent for the cookies in the category "Other.
cookielawinfo-checkbox-performance11 monthsThis cookie is set by GDPR Cookie Consent plugin. The cookie is used to store the user consent for the cookies in the category "Performance".
viewed_cookie_policy11 monthsThe cookie is set by the GDPR Cookie Consent plugin and is used to store whether or not user has consented to the use of cookies. It does not store any personal data.
Functional
Functional cookies help to perform certain functionalities like sharing the content of the website on social media platforms, collect feedbacks, and other third-party features.
Performance
Performance cookies are used to understand and analyze the key performance indexes of the website which helps in delivering a better user experience for the visitors.
Analytics
Analytical cookies are used to understand how visitors interact with the website. These cookies help provide information on metrics the number of visitors, bounce rate, traffic source, etc.
Advertisement
Advertisement cookies are used to provide visitors with relevant ads and marketing campaigns. These cookies track visitors across websites and collect information to provide customized ads.
Others
Other uncategorized cookies are those that are being analyzed and have not been classified into a category as yet.
Save & Accept