It is a well-known fact that nursing care, whether rendered at home or in a nursing facility, is extremely expensive. Even if one possesses substantial assets, those assets will be eroded quickly as a result of spiraling health care costs. Often, the most significant asset owned by the person needing such care is the family home. Therefore, it is important to take steps to ensure its protection.
A common method of financing long-term health care costs is the utilization of benefits available under the federally funded Medicaid program. Unfortunately, in order to qualify for benefits, the value of the assets which you own (including your residence) must be minimal.
A properly drafted irrevocable trust can preserve your home, and at the same time, avoid adverse gift tax and capital gains tax consequences. It can also provide you with a great deal of flexibility and some degree of control. For example, the trust can be designed to provide you and your spouse with the right to reside in the home for the remainder of your lives. If you later decide you want to move, you can require the trustee to sell the home and either buy another home in its place or invest the proceeds of the sale in order to provide you with income. Lastly, such a trust can provide for disposition of the home upon your death without the necessity of your heirs going through probate.
IRS Circular 230 disclosure: We inform you that any tax advice contained in this communication is not intended or written to be used, and may not be used by your or anyone else for the purpose of avoiding penalties imposed under the Internal Revenue Code.