Blog

A person’s home is often their most valued asset not only for its monetary worth, but for sentimental reasons as well. This is even more apparent as we approach the holiday season when your home is a gathering place for loved ones. Because your home is more than just property, passing it on to your loved ones is a common concern for many as they develop their estate plan. There is not a “one-size-fits-all” approach, so it is important to review the pros and cons of your options with professionals who can guide you to the best way to preserve and protect the legacy of your home.

Recently, a tool called a transfer on death deed has gained popularity. A transfer on death deed allows you to execute a deed that names the beneficiaries who will take title to your real property at your death. At your death, your beneficiaries are able to avoid the probate process and receive this real property without the need to involve an attorney, real estate agent or other third party. While it is an attractive option on its face, there are hidden dangers within this planning tool in West Virginia.

In contrast to using a joint tenancy deed or a legal remainder interest, the transfer on death deed does not create a present interest in the beneficiaries who are named. The significant advantage to this type of deed is that because there is no present interest for your beneficiary then there is no gift to him or her at the time the deed is created and you can change your mind as to who your beneficiary will be at any time. This means you have not gifted anything to your beneficiary which has the double benefit of not requiring gift taxes to be paid on the interest created and you have not given a gift that would disqualify you from receiving Medicaid benefits.

Due to these benefits, transfer on death deeds are an attractive planning technique when you or your loved ones are facing the need for long-term care planning. The monthly cost of a skilled nursing facility is high and many people are not able to afford it on their own. In the absence of long-term care insurance or the ability to pay for long-term care out of our private finances, many of us turn to the Medicaid program to be able to afford the cost of long-term care.

To qualify for the West Virginia Medicaid program, there are strict income and asset rules. The applicant also must not have made gifts to others in the sixty months preceding the application for Medicaid assistance. When we meet with our clients to discuss their goals and determine how they will qualify for the Medicaid program, they also want to protect the family home from being sold to pay for their long-term care costs and leave it to their children.

If you qualify and receive Medicaid benefits in West Virginia, the remaining assets in your name are subject to estate recovery at your death. This means that in most circumstances the state may seek repayment from any remaining monies. While a transfer on death deed appears to be a solution to this problem because at your death your beneficiaries will own your home, it is not foolproof. Under the current West Virginia law, even though transfer on death deeds avoid probate they are still subject to estate recovery and Medicaid may place a lien on your home even though it is now owned by your beneficiaries.

Many people believe a transfer on death deed is an easier and less costly alternative to estate planning and elder law planning strategies. At first glance, it may indeed appear easier. Depending on your unique circumstances, however, using this type of deed can have disastrous results should you need long-term care assistance from the West Virginia Medicaid program and the state pursues estate recovery at your death. For this reason, we encourage all of our clients and professional advisors to consider all available options prior to deciding which tool is appropriate for their personal goals.

Do you have a transfer on death deed right now or questions on what planning strategy is right for you? Don’t wait to call our office to discuss this with us. You can contact us through our website or call us at (304) 554 - 2900.