Navigating the treacherous waters of property transfer and long-term care planning can be daunting, but fear not—Jordan Bentley and I, Brenton Begley, are here to steer you clear of the pitfalls. Prepare to uncover the truth behind the common belief that simply gifting your family home to your children is the best legacy move. Throughout our discussion, we reveal how such a straightforward gesture can actually strip you of control and expose your cherished home to your child's unforeseen life events, such as divorce or financial strife. Moreover, we delve into the lesser-known consequences that could affect your eligibility for Medicaid and VA benefits, and offer potent alternatives like life estate deeds and ladybird deeds that keep you firmly in the driver's seat of your estate.
This episode also shatters the illusions of invulnerability that many have when it comes to probate and creditor claims. With insights from real-world scenarios, we illuminate the irrevocable nature of certain property transfers and how they can become ensnared in the complexities of marriage and end-of-life debt. I highlight the Lady Bird deed—a savvy tool unique to North Carolina residents—that promises control over your property until your final days, without the dread of probate lurking in the shadows. For those who want to keep their assets within reach and out of the court's hands, we talk about the strategic use of trusts, keeping your legacy intact for generations to come. Join us as we equip you with the knowledge to fortify your future, and remember, if you need guidance on these critical matters, we're just a call or click away.
Navigating the treacherous waters of property transfer and long-term care planning can be daunting, but fear not—Jordan Bentley and I, Brenton Begley, are here to steer you clear of the pitfalls. Prepare to uncover the truth behind the common belief that simply gifting your family home to your children is the best legacy move. Throughout our discussion, we reveal how such a straightforward gesture can actually strip you of control and expose your cherished home to your child's unforeseen life events, such as divorce or financial strife. Moreover, we delve into the lesser-known consequences that could affect your eligibility for Medicaid and VA benefits, and offer potent alternatives like life estate deeds and ladybird deeds that keep you firmly in the driver's seat of your estate.
This episode also shatters the illusions of invulnerability that many have when it comes to probate and creditor claims. With insights from real-world scenarios, we illuminate the irrevocable nature of certain property transfers and how they can become ensnared in the complexities of marriage and end-of-life debt. I highlight the Lady Bird deed—a savvy tool unique to North Carolina residents—that promises control over your property until your final days, without the dread of probate lurking in the shadows. For those who want to keep their assets within reach and out of the court's hands, we talk about the strategic use of trusts, keeping your legacy intact for generations to come. Join us as we equip you with the knowledge to fortify your future, and remember, if you need guidance on these critical matters, we're just a call or click away.
Good morning. This is Brenton Begley. I'm here with Jordan Bentley and we're here for the Elder Law Report. Good morning
Jordan Bentley:Good morning. I think I want to talk a little bit about how to pass your property on, how to preserve your main asset, which is usually your home.
Brenton Begley:That's right. That's right. So there's a large misconception about how to pass property properly. As far as that, all right, but we want to make sure we that's hard to say All right, but we want to make sure we do it and do it right. So let me ask you a question what is the benefit or possible detriment or how good of a plan is just transferring property from yourself to your child before you ever pass away? So, first of all, why would someone want to do that? And number two, how good of a plan is?
Jordan Bentley:that. So we're talking about just basically gifting your house to your kids. Yeah, just you know, because you'd hear Give it out of your name.
Brenton Begley:Yeah, and every seminar I've ever been to. You know many consults that I've been to. You know I get asked the question should I just put my kid's name on the property gift to them?
Jordan Bentley:That's one way to make sure they get it Right, but there's definitely a lot of problems that could come from that.
Brenton Begley:One. You don't own that house anymore. It's not yours.
Jordan Bentley:You can't do anything with it. It belongs to your children. You might love them, you might trust them, but things happen Also. Those children might have spouses, they might get sued, they might get divorced. There's all kinds of ways that not only could you not have control of that property, but your children could lose it as well.
Brenton Begley:Right, that's a good point. And so if we're talking about spouses, you know one of the issues there is that you might give it to your child and your child maybe you know good child, very loyal want to give it back to you if you need it. Let's say you needed to pull the equity out of the property.
Brenton Begley:Or if you want to sell the property downsized and put that money into a smaller home or townhome, something like that, and your kid's willing to give it back to you, but if they have a spouse, that spouse has to sign off on that transfer back.
Jordan Bentley:Oh, in the state of North Carolina. Yeah, Any transfer of property, any transfer of a home like that, any deed that you're signing, you and your spouse are both going to have to sign that deed, or the closing attorney is going to stop you right there.
Brenton Begley:Oh, wow, okay, yeah. So you could run into a situation where you've given your child your home and the spouse is the only thing standing in the way of you being able to get the home back. Exert control over the home.
Jordan Bentley:That's what it's kind of a trope right. You don't trust your in-laws or there's that relationship with your daughter's husband or your son's wife but it's a reality. And if you don't trust in, 100% of confidence in those people and what they're going to do in the future, you definitely don't want to give them control of the most valuable asset.
Brenton Begley:Right. So transferring that property does not ensure that you're going to be able to have control over it for the rest of your life. It almost guarantees that you don't Right?
Jordan Bentley:Yeah, so there's all kinds of not all kinds, but there's different ways that you could trust a property and maintain control, one of those being a life estate deed Right. There's also an enhanced life estate deed, which you've probably heard of called a ladybird deed Right. I think you draft those all the time.
Brenton Begley:Yeah, absolutely. So. Just backing up a little bit, I want to highlight, you know, one of the main things too about transferring any asset is that you have to deal with, or may perhaps end up dealing with, something called a look-back period.
Brenton Begley:Right, so at any point you're trying to qualify for a benefit to pay for long-term care, whether that is VA or Medicaid. There's something called the look-back period. Now it's three years for VA, okay, three years for assisted living, level Medicaid and five years for skilled nursing care. That's a long time. That's a long time. So what that is basically is saying even if you qualify for Medicaid, you would have otherwise qualified you have the right level of assets.
Brenton Begley:You know income isn't an issue, those sorts of things they're still going to look back a certain period of time three years for VA, three years for assisted living, level care, five years for skilled nursing to determine whether or not you've given something away. And if you have, they're gonna sanction you to the extent of the value of that asset that you gave away. So if I give my home away in 2024, that means that if that house is worth $300,000, then if I try to qualify for a benefit to pay for care for the next five years, let's say, okay, I will not qualify. I will not qualify for a benefit to pay for long-term care until 2029. That means that if any point in the future I need long-term care within that period, right, I could be in a really tough position.
Jordan Bentley:And that's because long-term care Medicaid I mean Medicaid knows what they're doing and they said that money, that gift that you gave, should have gone to them because you didn't need to you do transfer a property.
Brenton Begley:Anytime you gift an asset, that means that you transfer something and you didn't receive that value in return. Then that triggers that look back period. Now many people say to themselves well, I'm not gonna gift the property, I'm gonna sell the property, but I'm gonna do it for like a dollar or $10 or something like that. But if you have $100,000 property and you sell it for a dollar, you've gifted $99,999 worth of value. Okay, so it's not the fact that it's not the intention that you have behind it.
Brenton Begley:The gift for Medicaid purposes or for VA purposes is did you get the substantially same value in return for what you gave? Okay, and if the answer is no, then it's considered a gift and the difference in value counts against you for the look-back period. So if you just give your house away to your child, you've triggered a look-back period and probably won't qualify for care within a certain amount of time. And if you are in a position where you might not be able to make it three to five years if that's the real roll of the dice then perhaps you shouldn't be transferring ownership interest in your property. Okay, but you mentioned a life estate deed. Okay, so with a life estate deed. There's more benefit there, right Like? You get more control over the property rather than just transferring it.
Jordan Bentley:With the life estate deed that I'm not licensed in every state and I'm pretty sure you can do that in every state. But a life estate deed is you giving a future interest in someone that you choose. You're saying, when I die, the moment I die, that property belongs to you. You have a life estate, they have a future interest and you die. The problem with that is you give up a lot of control when you give that future interest away in a life estate deed. You can't take it back, you can't sell the property, you can't let the property go into a state of disrepair, you can't waste it. So you're really hampered by what you can do. Really, you can only live in it.
Brenton Begley:Right. So you have more control than if you had just given away the property, because no one can kick you out, right, but all you can do is live there, right, so you have the right to live there for the rest of your life, okay, and anyone you invite has the right to live there with you. Okay, for the rest of your life, not theirs. And so you have the right to occupy the property exclusively for the remainder of your life. But that's the only right that you retain in the property, in the property. And so whoever you name as essentially a beneficiary to the property to get it upon your debt, they are going to stay the beneficiary. You can't change who that person is.
Jordan Bentley:You can't take back the property. What if they wrong me? What if they make me really upset? What if I don't like the person I married? Can I do anything about it?
Brenton Begley:Yeah, so that's a good point. You cannot change who that person is unless they willingly give it up. Now again, you're in a situation where if it's a dutiful child, right, they could be willing to give that future interest back to you. But if they aren't married, then you have to get the spouse to agree Again. The spouse thing, yeah, yeah, exactly. Now what's really?
Jordan Bentley:cool in the state of North Carolina is we have something called an enhanced life estate deed. You've probably heard of the labor deed I mentioned that earlier and with that it's a life estate deed Everything we just talked about, but that word enhanced. You still retain rights as the current owner of that property. You can divest that future interest and change it or take it away. You can sell the property, you can rent it out. You have all of the control that you had before. You did this life estate deed or enhanced life estate deed while you're alive.
Brenton Begley:Right. So the optimal situation to be in if you're trying to protect property because the ultimate goal here is avoidance of probate I mean that's the reason why you want to do, you know, transfer the property at all right is avoidance of probate.
Jordan Bentley:So your employer will pass into your probate and the creditor is having a chance to put a lien on it and they can claim against it.
Brenton Begley:Yeah, exactly so, probate being the default process. So if you don't go ahead and have property set up during your life to transfer to a named individual right, then your assets are going to default to probate upon death because you know someone's got to make sure the assets get to the right people after someone dies, and that's the court. The court does that job. But they say, look, we don't want to get involved unless we have to. So you know, we're going to allow you the opportunity to set things up during your life so that we don't have to get involved, but if we do have to get involved, you have to play by our rules. Okay, so one of the rules that they have is, you know, is they make you invite any creditor to come make a claim against the estate.
Jordan Bentley:What if I don't have any creditors? What if I don't have bills? I don't have debts. What kind of creditors are we talking about?
Brenton Begley:Yeah, that's a very good question. So I'm not worried about your credit card bills, necessarily. I'm not worried about debt that kind of piles up during your life, just like normal every day. I'm mostly concerned about medical debt that's incurred right before someone passes away Pretty common thing. That happens Exactly Because long-term care is very expensive. The majority of individuals end up needing long-term care and the majority of individuals end up incurring substantial medical debt before they pass away, whether it's, you know, in-home care, long-term care, hospital bills, things like that.
Jordan Bentley:And that's where you hear about Medicaid coming and taking your house right.
Brenton Begley:Right or any other credit creditor coming to take your house. But it's important to know that North Carolina was called a limited recovery state, meaning that any creditor, if they want to come after what you got after you die right, they're limited to going after only those assets that pass through the probate processor or are subject to probate. So, that being said, avoiding probate can allow you to avoid creditor claims against the estate. That means that if you owe a bunch of money to a creditor and then die, if you're keeping your assets out of probate in the correct way, then what that can allow you to do is avoid having those assets used to pay those claims. Okay, so if you want to preserve a property for a loved one, like a spouse or the next generation, one of the things you really want to do with that property is avoid probate. That's what we're talking about. So you know a bunch of people are trying to figure out how to do that in the best way, so obviously, giving your property away is not one of them.
Brenton Begley:A life estate is a better situation, but not optimal.
Brenton Begley:Optimal is keeping the property in your name under your control for the rest of your life, having the ability to change who you name as a beneficiary to the property at any point and the ability to take that back. And then the ability to sell the property, retain the proceeds from the sale and generally do whatever you want to with the property, just like you would if you never changed the deed to with property. Just like you would if you, you know, never changed the deed to the property. Just like you would if it's in just your name. So that's the ideal and optimal situation is to have a setup where you name a beneficiary where it passes them just like that upon death, okay, immediately, avoids probate and any creditor claim, and also you still have control over the property, 100% control.
Brenton Begley:You can do anything you want to with the property. So that's what you're calling the enhanced life estate deed, what's also known as the Lady Bird deed. Right, okay, awesome, yeah, so Lady Bird deed is something that we've had in North Carolina. It's actually been around since the 1890s. It wasn't called Lady Bird deed then until it was given that name by a law professor in Florida back in I think it was like the 70s.
Jordan Bentley:Yeah, he just kept using it as an example Right. Someone named Lady Bird and she would give the future interest to life, and the name got on.
Brenton Begley:Right, right. So we have Lady Bird D. That's an option. Another option is putting property in trust. Right, that's a great way to avoid probate yes, it is Okay, and then with a trust you know, if you're your own trustee, you keep control over any asset that you put in trust.
Jordan Bentley:We I think explain that almost more than anything else to people in appointments when we talk about trust is that as the trustee you have full control of everything in the trust. You put stuff in, you're taking stuff out, you can use what's in there for your benefit while you're alive.
Brenton Begley:Right good deal. So point is is that you don't have to give your house away. You don't have to give any of your assets away. One of the things that you can do is put a labor or a deed on property to help protect it, maintain all control, and there's also the option of putting things in trust and doing the same thing. Where you put an asset in trust, you maintain all control, but it also allows you to avoid probate. So, that being said, if you have questions about how to protect property, how to avoid probate, lady birdies or anything else that we do with regard to elder law or estate planning, give us a call 704-259-7040 or visit our website mcelderlawcom. And this has been the Elder Law Report. Thank you, jordan. Thank you, brandon.