29 Jan Risks of changing your home’s deed
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Q. I am 83, a widower, still seemingly in full possession of my mental faculties. My modest mortgage-free house is deeded in my name only. My only daughter lives in Pennsylvania, is my executrix, sole beneficiary and has durable financial and health powers of attorney. Although I am 83, I have made no plans to move. Should I changed the deed to add her for when I kick the bucket? My daughter will want to sell the house.
— Still kicking
A. Planning for when you’re gone is smart, but you didn’t share your motivation for wanting to add your daughter to the deed.
If you want to avoid the probate process — which is not terribly involved or expensive in New Jersey — then changing the deed to add your daughter as Joint Tenant With Right of Survivorship will avoid the need to probate when you pass away, said Yale Hauptman, an estate planning attorney with Hauptman and Hauptman in Livingston.
There are, however, potential negative consequences.
Hauptman said if the home has unrealized capital gains then when you pass away, only your half would be eligible for a step-up in basis.
“If you sell the home while you are alive you can exclude up to $250,000 of capital gains from tax if it was your primary residence in two of the five years directly preceding the year you sold it,” he said. “Adding your daughter means her half won’t be eligible for the exclusion because she has a primary residence in Pennsylvania.”
Also, he said, if your daughter has creditors to whom she owes money, those creditors could attach a lien to her half of your home.
You said you are 83 and the home is of modest value, but you make no mention of what other assets you own or whether you have long-term care insurance or another plan to pay for long-term care should you need it.
If you transfer half of your home to your daughter, it could be problematic if you need long-term care and need to qualify for Medicaid.
“Medicaid utilizes a five-year lookback to determine if you gave assets away within five years of your application for benefits,” Hauptman said.
Transferring the home could make you ineligible for a period of time.
So, Hauptman said, you should speak to a knowledgeable elder law attorney about your specific situation to be sure you understand all the ramifications of taking such action.
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