Transfer Current Deed When Moving to Senior Care: Wise Move or Not?

You’re thinking of transferring the deed to your home and moving to an assisted living community. Is this a good idea? Can it keep the deed from being taken over to pay for care? Is it the best way to get the deed to your chosen beneficiaries and keep the transfer from becoming a probate matter?

So many questions, and you need timely answers. Let’s go.  

To Preserve Home Equity: A Deed Transfer as Asset Depletion

Are you doing your planning in advance? So far, so good. If you can convey your deed at least five years before you’ll move to a life plan property, this transfer could be timed right and give you a sense of completion.

Medicaid (not Medicare) pays for long-term senior care. But only for people whose personal assets are very small. Transferring the deed might be the key to Medicaid eligibility—if your home is your sole major asset. Once you move out of the home, it becomes fair game for Medicaid!

Yes, your state must, by law, seek recovery from your estate for Medicaid funds if you rely on them. The state will place a lien on the home, which can lead to a sale so that Medicaid can recover funds from the sale proceeds.

No wonder people sometimes want to deplete their assets, including their deeds—so the state can’t reach that value. But the deed to your home must have been transferred five or more years before you move to senior care to be off-limits to Medicaid recovery. Transferring a deed for less than fair market value during those final five years before starting assisted living? You could face penalties from the state Medicaid division.

While transferring a deed well in advance of when you might need Medicaid is a common strategy to keep wealth in your circle and out of the government’s hands, it does have tax implications. Your tax/finance pro might, therefore, point you to the possibility of a life estate deed, or a specific kind of trust tailored to your situation, or a transfer on death deed, instead of an outright deed transfer now. Or you could simply leave the home in your will, as many people do. Probate can be the best process for many families.

Find the right deed form for your county and state. Meet up-to-date requirements. Step-by-step instructions included.

Gift or Sale? The Significance of Fair Market Value

Unless a deed is transferred as an outright gift, your transfer will be a contractual agreement. This means it will be made with mutual consideration. The buyer pays money. The seller, in return, transfers the deed.

The deed representing the transfer to a non-spouse usually discloses how much was paid by stating one of the following:

• Actual consideration. The price your recipient pays for ownership of the home. For example, the amount $375,000 reflects actual consideration.
• Nominal consideration. You might have seen a contractual agreement written “for the sum of ten dollars.” As long as the deed says “for consideration,” the world knows that the deed passed through a sale.

But of course, the local assessor will always receive information on the price paid when you sell the home to your family member. The local government stores this data for property tax purposes.  

When a transfer occurs between family members through a gift deed, the language on the deed usually says the deed was passed in return simply for “love and affection” rather than money. Whether the transferor should put nominal consideration on the deed instead is a question for a lawyer. Title companies have lawyers on their staff who work with these questions on a regular basis.

Which states require “actual consideration” to be disclosed in a sale? See this list of examples of State Requirements for Consideration in Home Purchase Agreements, from Deeds.com.

Second Thoughts? Potential Reasons Not to Transfer Your Deed Just Yet

First, there’s the obvious reason. If you transfer the deed during your lifetime, you no longer have that store of equity value to tap into. Be sure you won’t need to rely on your home for your needs as you grow older.

Also, if you bequeath a home to someone else after you pass away, your recipient will get a potentially hefty tax break if they opt to sell the property—which, of course, they will have every right to do.

Important note: This article is simply a springboard for your due diligence. Remember that nothing found on an internet search—not even AI—can substitute for thoughtful advice from a licensed legal or financial pro.