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Giving your home away as an estate planning tool

On Behalf of | Oct 9, 2013 | Asset Protection |

It may seem counterintuitive, but there may be instances in which giving away your home may be the best course of action as part of asset protection and estate planning strategies. Older New Jersey homeowners and their families may want to consider such a gift under certain circumstances.

One reason relates to the owner’s potential need for expensive long-term medical care. One government study indicates that 40 percent of people over the age of 65 will require at least some time in a long-term care institution at an average annual cost of $140,000. While long-term care insurance helps to protect against this possibility, some individuals neglect to purchase it when they are younger and it is quite expensive to purchase at an older age. As Medicaid has a five-year look-back provision, an owner would be eligible for Medicaid should he or she enter a facility after that period had expired.

Another reason to give away the home is to avoid estate or inheritance taxes. New Jersey estate tax applies to assets over the $675,000 exclusion. Removing the family home from personal ownership into a family trust can help reduce these transfer taxes when the owner dies. A final option is to put the house in a charitable remainder trust. This mechanism allows a person to remove the house from his or her taxable estate while receiving a lifetime income stream and a charitable tax deduction.

An attorney with experience in estate planning may be able to suggest various asset protection strategies. The attorney may be able to include those methods as part of an effective overall estate plan.

Source: NorthJersey.com, “Neumann: Should you give your house away?”, Randy Neumann, October 04, 2013