SENIOR SIGNALS: Different rules for transferring funds, real estate

senior signals different rules for transferring funds real estate - SENIOR SIGNALS: Different rules for transferring funds, real estate

Don’t you hate to be the bearer of bad news? We all do. Unfortunately, sometimes it just can’t be avoided. Consider the following situation.

Mrs. Smith goes to see an elder law attorney. Her husband was diagnosed with Alzheimer’s disease three years ago and the disease has progressed to the point where he needs long-term care.    

At the time of the diagnosis, she talked to some friends of the family and they told her to go ahead and add the kids’ names to her bank accounts and mutual funds as a way to protect those assets from Medicaid. Now that her husband is in the nursing home, she wonders whether she did the right thing. Unfortunately, you, as the attorney, have to break the bad news to her.

In Connecticut, Medicaid says that adding someone’s name to a bank account or mutual fund does not transfer the ownership on that account. In other words, if Mrs. Smith had a bank account with $20,000 and she added her daughter’s name to it, the state would say that her daughter’s name was added for convenience purposes. In other words, the entire account still belongs to Mrs. Smith. So even though the child’s name has been added, the practical effect, from a Medicaid standpoint, is that there has been no gift and the entire account still belongs to Mrs. Smith.

This is true whether we are talking about bank accounts, certificates of deposit, savings bonds, mutual funds or any other liquid asset. The law says there is no gift until, and unless, the child actually takes the money out of the account. In other words, using this same example, Mrs. Smith added her daughter’s name to the account three years ago, there has been no gift made. If her daughter later takes some money out of the account, and moves it into her own name, then the gift is made at the time the daughter takes the money out of the account.

This general rule is not true where real estate is concerned. That’s because if someone’s name is added to real estate, at the time the deed is signed and recorded, then a gift has been made. However, this transfer could trigger a state of Connecticut gift tax and create a period of Medicaid ineligibility.

For instance, let’s say Mrs. Thompson is a widow and she owns a house valued at $200,000. If she adds her son’s name to the house and then has the deed recorded, at that time, she has made a completed gift. And remember, a gift in the amount of $100,000 could cause her to be ineligible for Medicaid for approximately five years.

Whether or not it makes sense to add someone’s name to real estate or financial assets depends upon the facts and circumstances of each particular case. There are many exceptions in Medicaid law that could enable a family to protect real estate in a period shorter than five years. Be sure to seek the advice of an experienced elder law attorney before transferring any assets.

Attorney Daniel O. Tully is a partner in the law firm of Kilbourne & Tully, P.C., members of the National Academy of Elder Law Attorneys Inc., with offices at 120 Laurel St., Bristol (860) 583-1341.

Posted in The Bristol Press, General News on Sunday, 10 March 2019 21:09. Updated: Sunday, 10 March 2019 21:12.

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