Last month, an article was posted, "How to Leave Your Home to Your Children." The article was not specific to the state of Alabama. Jan Neal, an attorney with Jan Neal Law Firm, LLC, offered to give us advice more specific to the State of Alabama. The state has specific rules, and below is Jan Neal's article:
There are multiple ways to ensure your home is left to your children or the person of your choice when you die, but planning is essential to make for a smooth transition. Some of those planning techniques include the following:
- Include your home in your will to ensure it passes to the person or persons of your choice, known as your beneficiary or beneficiaries. The probate process will ensure that your wishes stated in your will are honored, but any debt on your home, or otherwise, will have to be repaid before any property can be passed to your beneficiary.
- Create a revocable living trust to distribute your property to the person of your choice. When a trust is created and property titled to the trust, there are provisions designating to whom the property passes after your death, and that can be accomplished without having to go through the probate process. Again, creditors have to be satisfied before the property can pass.
- Give the property to your children or whomever you want to have it (future owners) and retain a life estate. This is called a Life Estate Deed. You can continue to live on the property, pay tax at homestead rates, and insure the property until you die, at which time the future owners will own the property outright without the need for probate.
- Title your property to yourself and your children as joint tenants with the right of survivorship. When you die, the joint tenant will own the property outright without the need for probate.
A word of warning is necessary. Planning is important at least five years before you may need Medicaid to pay for long-term care because Medicaid will place a penalty on any transfer for less than fair market value within five years of application for benefits. That means you cannot qualify so long as you are subject to a penalty. So if you give your property to your children (options 3. and 4. above), it must happen at least five years before the Medicaid application. If you place property in a Revocable Living Trust, that property is considered available to you to spend down before qualifying for Medicaid, so a Revocable Living Trust will not shield assets for Medicaid purposes. There is an irrevocable Asset Protection Trust you can consider that will shield assets if created five years prior to Medicaid application.
You may contact Jan Neal with Jan Neal Law Firm, LLC at (334) 745-2779. Her firm is located at 207 N 4th St, Opelika, AL 36801.
The firm would like to thank Jan Neal for her contributions.
For more information about the above article or other estate and trust tax services, contact Lesley L. Price, CPA, by calling (334) 887-7022 or by leaving us a message below.
