Beware of Multi-Generational Joint Property Ownership
Following up on our previous blog post concerning joint accounts, I felt the need to warn about some issues involved with the multi-generational joint ownership of real property. A typical situation usually involves a retiree who has children and wants to add the children as joint tenants on the family home to avoid probate. Although this may seem like a good idea at first, such a transaction could have a negative impact in any one of a number of ways.
First of all, any individual who adds another person to the title of their real property is creating a transfer. A transfer of interest in property must be for fair market value, or the person making the transfer runs the risk of being denied Medicaid benefits altogether or being assessed Medicaid penalties for divesting or gifting. A divestment or gift, for Medicaid purposes, is any transfer of interest in real or personal property that is for less than fair market value. If you divest or gift something away, it will be presumed that such divestments or gifts were made in order to qualify for Medicaid, and penalties may be assessed or benefits may be denied. Please remember that Medicaid tracks all transfers made within five years of the date of applying for Medicaid.
Secondly, consider the rights you have as a sole owner of your real estate. If you are the sole owner of your home, and you place two of your children on the title as joint tenants, you have effectively split your rights into thirds. Further, think of the liability you have as a sole owner verses a joint owner. Any issues involved with the new joint tenants’ creditors could become issues of your own. If your joint tenants experience divorce, bankruptcy, a business failure, a court judgment, or any other kind of liability, your home would be exposed to their creditors.
The bottom line is this: there are better ways to avoid probate than to quit claiming interests in your real property multi-generationally. Whenever considering any transfers of interest in real property, seek out the advice of an experienced elder law attorney. Remember, even innocent transfers could create Medicaid penalties or lead to the denial of benefits.
Michigan Elder Law Attorneys at The Elder Law Firm PC provide assistance in protecting your assets and protecting your family through trusts, wills, Medicaid and estate planning. Contact us by calling 616.840.3754 or by requesting a free consultation online here.