By J. Erbes, SIUC Legal Services to Older Persons.

Many Southern Illinois seniors face the prospect of spending at least part of their years in a nursing home. A common concern is what will happen to the assets and property they have worked hard to accumulate – particularly their home. Even those who have carefully planned for their death with a will or estate plan are concerned that medical expenses or nursing home care could consume these assets.

At the SIUC Legal Clinic, we talk to many seniors who are contemplating the transfer of their home or other assets to one or more of their children during their lifetime, instead of waiting for their property to pass at death. They normally prefer to give the property without the payment of any money. However, they have heard many stories about such transfers – good and bad.

This situation poses many legal ramifications. Among those, is the possibility that a transfer of this type could render a person ineligible for Medicaid benefits for a period of time.

The federal Medicaid program, which is administered in Illinois by the Department of Public Aid, will provide benefits for the payment of nursing home care for a person qualifying under the low Medicaid asset level provisions. In order to reach this asset level, Medicaid allows certain transfers of assets to be effectuated without incurring a period of ineligibility for Medicaid benefits. Under current rules, Public Aid will take a look at all asset transfers made in the 36 months (60 months for certain trusts) prior to the application for Medicaid benefits.

There are certain transactions called “exempt” which are allowable transfers specifically provided for by Medicaid rules. For instance, the transfer of a home is exempt if conveyed to:

1. A spouse;
2. A child under 21, or a disabled child;
3. A brother or sister, if they have an equity interest in the home and resided in the home for at least one year prior to applying for benefits; or
4. A child who resided in the home and provided care for at least two years prior to application for benefits.

Other allowable transfers include a transfer for fair market value, a transfer of assets to a community spouse or to another person for the sole benefit of the community spouse, a transfer of assets where the denial of benefits would create an undue hardship or a transfer made exclusively for a purpose other than to qualify for Medicaid benefits.

While the Medicaid aspects are important, there are also many other legal issues to be aware of if you are considering the transfer of your assets or adding someone’s name to your real estate or financial account – issues which could have a big impact on you and your family members.

The following highlights some of the potential problems seniors could encounter based upon actions taken or contemplated –

1. Signing a deed conveying your home to someone else. Transferring your home is a step to be taken only after considering all the legal ramifications. Once you sign a deed conveying your home, you no longer have a legal interest in that property. This means that the new owner has the legal power to evict you from the home should a dispute arise. We have seen many unfortunate incidents when this has in fact occurred, even by a family member. Moreover, since you no longer own the property, then the real estate taxes may not be reduced by the “homestead” exemption and the added senior citizen exemption. For a senior on a fixed income, the additional real estate taxes could cause financial hardship. If the new owner does not pay the real estate taxes, the property may be sold at a tax sale, which could ultimately lead to ownership by a third party stranger. We have also seen many situations where a senior has placed another person on their deed as a joint tenant, and later want to have that person’s name removed. This can only be done if the second owner is willing to sign a deed conveying the property back to the senior.
2. Transferring ownership of property to another, or adding someone’s name to your property. If you transfer ownership of property to another or add their name to your property, without receiving value or entering into an agreement for repayment, then the law presumes you are making a gift of that property. For example, if you have a $10,000 CD and you add someone as a joint tenant, you have made a gift. Unless you specify a restriction, such as requiring two signatures to access the account, then the other person has the authority to cash in the CD without your knowledge or consent. Usually, a senior will add someone as a joint tenant because they want that person to receive the asset upon their death or to allow the second person to have access to their account for the convenience of the senior. In the first instance, a safer way to accomplish the senior’s wishes would be to make the financial account a “Payable on Death” account instead of a joint tenancy account. In that way, the designee receives whatever funds are left at your death, but until death, you retain complete ownership and control. To give someone legal access to your account without transferring ownership, a senior could sign a Durable Power of Attorney for Property. The Power of Attorney gives the person you designate as your agent the legal authority to have access to your account, but only for your benefit. A Power of Attorney is not without risk, and you should only name someone as your agent who you know and trust, however, a well-thought out Power of Attorney is much safer than the outright transfer of your property or the adding of a joint tenant.
3. Property decisions made hastily may make unwanted changes to a previous estate plan. Perhaps a senior has made a will which passes all of their property to their children in equal shares. If they later add one of their children as a joint tenant on a bank account, then that child will get all of the funds in that account at death in addition to an equal share of the remaining estate assets. Suppose a senior transfers ownership of their home in joint tenancy to one or more children. A child’s future financial difficulties could result in a creditor having a lien on the property or a divorce could result in an in-law having a legal interest in the property.
4. Consider the tax consequences to those who receive your property. A knowledgeable tax advisor should be consulted regarding the specific tax consequences. For the scope of this article, suffice it to say that a senior who gives a child real estate during their life may create tax liability to the child which could be reduced or avoided if the property were passed at their death.

No one knows what the future holds. Seniors of all ages may think they can predict what life will bring for the remainder of their years. However, events can occur to drastically change our lives at any age. It is important that you maintain control and flexibility over your property, so that you can continue to enjoy it and not be negatively affected by a premature transfer of ownership or control to someone else.

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