When planning your estate in Minnesota, it is essential to consider how to distribute your assets, particularly your family home. If you do not have a documented plan, your loved ones may endure a lengthy legal battle and potential tax liabilities. Various options can help you approach this issue proactively and ensure that your property will transition smoothly to your heirs.
Transfer the home while still living
This straightforward approach has some advantages. Once the home’s title is in the name of your heirs, your children can avoid probate and the associated time and expense. Your children may agree to pay for part of the property taxes, maintenance and other expenses.
If you need nursing home care, the property will no longer be considered for Medicaid eligibility after five years from the sale. If you want to continue living in the home after selling it to your children, you may need to create a deed that gives you the right to continue living there until you die.
However, the disadvantages outweigh the advantages. You will lose the mortgage deduction for your income tax return since you no longer own the home. If you need nursing home care within the first five years, you may not be eligible for Medicaid. You may also lose control over your home because your heirs need to approve a sale or refinance. Additionally, if your child takes over the house’s title and subsequently files for divorce or bankruptcy, creditors or the ex-spouse may be able to obtain legal ownership of the home.
Bequeath the home in your will
You can retain control over your home if you transfer it to your heirs through your will. This option can help in terms of arrangements for end-of-life care. However, this type of care is often costly and insurance typically does not cover it. If you apply for Medicaid to cover these expenses, your home would be considered an asset and may disqualify you for coverage.
Create a trust
You can create a family trust to transfer the home to your heirs as part of your estate planning. The property will transfer to the trust’s beneficiaries upon your death and avoid probate. It may also reduce or avoid taxes, and depending on the trust you choose, it may protect your home from creditors and legal claims.
If you have other assets besides your home, you can create individual trusts for each child to prevent disagreements or friction between them.
Planning and putting your wishes in writing can ease the transfer of your home and other assets to your heirs. This act can make a difficult time easier for them while ensuring a smooth and equitable transfer of assets.
