There are many different ways to arrange for the transfer of property to your children. The optimal course of action will vary depending on your objectives and the unique nature of your circumstances.
Joint tenancy is one option. A joint tenant is a co-owner of property. You could potentially add your child to your home deed or the title of some other type of property. He or she would become a joint tenant.
Under right of survivorship, he or she would inherit the entirety of the property after you die. This transfer would take place outside of the process of probate.
Probate is a legal process that comes into play when you maintain direct, sole possession of property until your death. It is not inherently negative, but it can be time-consuming. You can eliminate this step by arranging for asset transfers that take place outside of the process of probate.
Joint Tenancy & Medicaid Planning
In addition to the probate avoidance angle, joint tenancy can be useful for those who are engaged in Medicaid planning. Medicaid pays for most of the long-term care that is received by seniors in the United States. This is because Medicare doesn’t pay for long-term care.
To qualify you must have very limited financial resources, but you can maintain ownership of your home. However, the Medicaid program can seek recovery of monies spent after you die through the attachment of your property.
If you were to name your child as a joint tenant of your home, he or she may be able to assume ownership of the entirety of the home without facing the prospect of attachment by the Medicaid recovery unit.
Drawbacks of Joint Tenancy
The question of whether or not you should create a joint tenancy with your child is a complicated one. We have briefly outlined some of the positives, but there are drawbacks as well.
When it comes to Medicaid, there is a five year look back. You can’t find out that you need long-term care today, make your daughter the joint tenant of your home tomorrow, and qualify for Medicaid the next day. If you give away assets within five years of applying for Medicaid, a penalty is imposed. This penalty delays your eligibility.
Therefore, to use joint tenancy as a Medicaid planning strategy you have to act well in advance of applying for the program. You would be divesting yourself of full ownership of your property before there is any actual need to do so.
As a result, the property would be subject to attachment if your joint tenant was to experience financial difficulties. He or she would also have to sign off on the sale if you decided that you wanted to sell the home, and this is another drawback.
Learn More About Joint Tenancy
If you would like to learn more about joint tenancy, download our free special report on the subject. To access your copy of the report click this link and follow the simple instructions: The Trouble With Joint Tenancy.