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We're retired and want to buy a house in trust for an adult child with us, the parents, having a life estate to reside in it.
The house is in Maine, we would be paying cash - no mortgage, and the goal is to secure a future asset for the adult child after we're gone (the child is younger, unsettled and doesn't want to own any property at this time).
We've been advised against simply adding the child's name to the deed because that creates more problems than it solves. A trust with life estate seems right.
Aside from the potential personal issues people could worry about, I'm sure there are pros and cons to doing this. How to go about it... costs, legal complications, etc? Input/ideas appreciated.
Thanks.
The creation of the trust is a legal no-brainer, any semi-competent attorney could bang something out of their "fill in the blanks" boilerplate in minutes and file it with the proper court in a day or so.
The bigger issue is why you feel the need to do this and why the child does not want to own property. Do they have the means to support themselves and the taxes and maintenance on this property now or ever? Would there need to a trustee to handle the issues of responsibility? How will this structured for both current and future taxes?
The answer to these questions is the difference between a couple hundred bucks of the minimal boilerplate and many times more than that for something that actually begins to accomplish your goals...
The child is mid 20's, self supporting, capable of doing maintenance, very responsible, but is focused on young person's things - more education, social life, career - and is likely to relocate to a big city soon. Owning real estate is not a priority now but we're able to make the financial gift now.
You can simply create a trust for your will. My father left his house and farm in trust to my sisters and I. When he passed, they became ours. He did have his gf on in a living trust (she can live there but we own it...she has to pay taxes and insurance and minor upkeep). I have to say, the life estate that she has is more of a hassle. If he doesn't want the property, then he won't want it in a trust. You can still break the trust and get rid of the property.
If you don't think he will live in it, then I wouldn't do a life estate. That stays with the deed. You want an estate attorney. That will run down all your choices and can help you make the choice that is best for you.
How does this arrangement affect medicare planning? (Do the parents have nursing home insurance?) Does this house remain a non-countable asset of the parents? Or, does this practically eliminate medicare from paying for nursing home expenses?
How does this arrangement affect medicare planning? (Do the parents have nursing home insurance?) Does this house remain a non-countable asset of the parents? Or, does this practically eliminate medicare from paying for nursing home expenses?
Assets have to be transferred 3 years before you start needing Long-term care services ie home care or nursing home to qualify for Medicaid (which is the government program that covers long-term care that is geared for the poor and indigent). You pretty much have to have gotten rid of ALL of your assets except for your house a car a wedding ring and a little cash to qualify for Medicaid. Medicaid is not a good option for long-term care planning as you do NOT have the ability to pick and choose providers and nursing homes etc. You take what is offered. You are better off getting a LTC policy or a Life Insurance Policy with a living needs benefit or access to the face amount of the policy for long term care which would cover nursing home and home care.
Keep in mind that Medicare pays for very little in the way of long-term care or custodial care. Medicare pays for acute care and for chronic and degenerative diseases and nursing home in a SKILLED nursing facility for up to 100 days AFTER a hospital stay... but does NOT for help if you need custodial care --assistance with bathing, eating, toileting, transferring, dressing and which is what LTC insurance covers.
You know I just realized that the life estate was going to be for you and not for your child. I totally misread that...and yes life estates are perfect for that.
You know I just realized that the life estate was going to be for you and not for your child. I totally misread that...and yes life estates are perfect for that.
Right....we want to give the adult child the house now but we want to live in it. Our thinking is mainly to give the gift now while we can.
Since the adult child has other priorities now, education not home ownership, and we don't want to rent a house out and take on landlord responsibilities, it would make sense for us to live in the house and pay all the taxes, improvements and upkeep.
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