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How can we save our home from Medicaid if we need care?

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Q. My husband and I are retired and have one adult daughter. We still have a mortgage on our home. If we are still in our house in the future, we’d like to leave it to our child. But if one of us needs to go into a nursing home in the future, how can we prevent our house from being taken away from us or our daughter? Will a trust work?
— Planning

A. We’re glad to hear you’re planning ahead, but realize that everyone’s situation is different and no one solution works for everyone.

Plus, the laws that govern this are often in flux, so you want to make sure you work with a qualified elder law attorney who can discuss the specifics of your situation.

But generally, it is essential to plan and take action early because there is a five-year look back with respect to transfers made in connection with Medicaid applications, said Catherine Romania, an estate planning attorney with Witman Stadtmauer in Florham Park.

She said the good news is that as long as one of you is living in the home, Medicaid considers the home an exempt asset.

“Proper planning is required should the community spouse predecease the institutionalized spouse,” she said. “Before you make any transfers, carefully consider the tax consequences to you and the beneficiary of making a gift because after making a gift, the beneficiary — including a trust — will have your basis in the property and substantial gain likely upon sale.”

Also, it is important to consider that Medicaid has both a medical and financial component, Romania said.

“Although you may meet the financial test by divesting yourself of assets, you may not qualify medically,” she said. “In such a case, in the future you may be dependent upon your child for support.”

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This story was originally published on Oct. 8, 2021.

NJMoneyHelp.com presents certain general financial planning principles and advice, but should never be viewed as a substitute for obtaining advice from a personal professional advisor who understands your unique individual circumstances.