1. 7171stst
Semi-Annual Tax and EstateSemi-Annual Tax and Estate
Planning ForumPlanning Forum
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HOUSE OWNERSHIP OPTIONS WHENHOUSE OWNERSHIP OPTIONS WHEN
A PARENT & ADULT CHILD LIVE TOGETHER:A PARENT & ADULT CHILD LIVE TOGETHER:
TAX, MEDICAID AND PERSONAL ISSUESTAX, MEDICAID AND PERSONAL ISSUES
Presented byPresented by
Donald D. Vanarelli, Esq.Donald D. Vanarelli, Esq.
Certified Elder Law AttorneyCertified Elder Law Attorney
Accredited Veterans AttorneyAccredited Veterans Attorney
Founding Member, Assn. of Special Needs PlannersFounding Member, Assn. of Special Needs Planners

2. RECENT SURGE INRECENT SURGE IN
MULTI-GENERATIONALMULTI-GENERATIONAL
FAMILY HOUSEHOLDSFAMILY HOUSEHOLDS
Reasons:Reasons:
• The “boomerang generation” of youngThe “boomerang generation” of young
adults returning home because of aadults returning home because of a
difficult economic climatedifficult economic climate
• Seniors are no longer willing or able toSeniors are no longer willing or able to
live alonelive alone

3. IMPACT OF HOMEIMPACT OF HOME
OWNERSHIP OPTIONSOWNERSHIP OPTIONS
• Medicaid planning
• Taxation
• Personal issues

4. MEDICAID:MEDICAID:
BACKGROUNDBACKGROUND
• Joint federal and state program created under
Title XIX of the Social Security Act of 1965
• Provides a source of funding for long-term care
to those aged, blind and disabled individuals
who qualify based on financial need
• “Penalty periods” for transfers for less than fair
market value during 60-month “look-back
period”

5. MEDICAID AND THE APPLICANT’SMEDICAID AND THE APPLICANT’S
PRINCIPAL RESIDENCEPRINCIPAL RESIDENCE
• A house occupied by the Medicaid applicant (or spouse) as
his/her principal residence is not an available resource
• Transfer of house (to someone other than the spouse), even
if parent’s primary residence, is subject asset transfer
provisions
• New Jersey recovers Medicaid funds expended from the
deceased recipient’s estate. “Estate” includes assets
“conveyed to a survivor… through joint tenancy, tenancy in
common, … life estate….” (“life estate” defined as “a life
estate created upon the death of a beneficiary”).
N.J.A.C. 10:49-14.1(l)(2).

6. OUTRIGHT TRANSFER TOOUTRIGHT TRANSFER TO
CHILDCHILD
• Parent loses rights to or control of the
property
• Parent must wait 60-months to apply for
Medicaid, or gift is subject to transfer
penalty
• Parent loses Homestead Tax Rebate and
Senior Citizen’s Deduction
• No “step-up” in basis

7. JOINT TENANCYJOINT TENANCY
• House passes on parent’s death to child—no
need for probate
• Parent must wait 60-months or gift of remainder
interest is subject to Medicaid transfer penalty
• Value of parent’s share is counted as a Medicaid
resource
• Entire property is subject to estate recovery
• The total value of the property is normally included
in the valuation for inheritance tax purposes

8. TENANCY IN COMMONTENANCY IN COMMON
• Parent’s interest will pass on death according to
parent’s will (or by intestacy)
• Subjects parent to a Medicaid penalty if the
parent applies for Medicaid within sixty months of
the transfer
• Value of property is divided by the number of
owners; parent’s share is counted as a resource
• Parent’s one-half interest is subject to estate
recovery

9. TRANSFER TO “CAREGIVERTRANSFER TO “CAREGIVER
CHILDCHILD ””
• Child resided in the home for 2 years; provided a
level of care sufficient to keep parent out of the
nursing home for 2 years
• No Medicaid penalty
• No estate recovery
• Gift tax return must be filed

10. TRANSFER TO DISABLEDTRANSFER TO DISABLED
CHILDCHILD
• No Medicaid penalty
• No estate recovery
• Gift tax return must be filed
• “Sole Benefit Of” trust, if disabled child is
under 65 and eligible for needs-based public
benefits

11. LIFE ESTATE WITH RETAINEDLIFE ESTATE WITH RETAINED
POWER OF APPOINTMENTPOWER OF APPOINTMENT
• Parent retains control of the house
• Subject to Medicaid penalty--amount of gift
reduced by value of life estate
• No Medicaid estate recovery
• Gift tax return must be filed

12. LIFE ESTATE WITH RETAINEDLIFE ESTATE WITH RETAINED
POWER OF APPOINTMENT (cont’d)POWER OF APPOINTMENT (cont’d)
• Real estate taxes deductable on parent’s
federal income tax return
• Parent retains Homestead Tax Rebate and
Senior Citizen’s Deduction
• Child receives step-up in basis upon parent’s
death

13. TRANSFER HOME WITH USETRANSFER HOME WITH USE
AND OCCUPANCYAND OCCUPANCY
AGREEMENTAGREEMENT
• Parent has lesser right than the right to a life
estate
• Gift is subject to a transfer penalty
• Parent loses Homestead Tax Rebate and
Senior Citizen’s Deduction

14. PERSONAL ISSUESPERSONAL ISSUES
• Adult child becomes unemployed and moves
into the parent’s home. Child feels that her
care of the parent entitles her to the home
upon death. Child’s siblings see it as freeloading”
• Parent transfers home to daughter and son-in-
law; they get divorced
• Parent transfers home to child; child has
person debt or other financial issues

15. PERSONAL ISSUES (cont’d)PERSONAL ISSUES (cont’d)
• Parent purchases a life estate in the child’s home
and dies very shortly thereafter. Siblings feel that
the life estate purchase price should be shared
among the children
• After house transfer, it becomes apparent that the
parties will not be able to successfully live together
• A father gifts house to child; within the five-year
look-back period, the father requires nursing home
care

16. Thank YouThank You
For Your AttentionFor Your Attention
Questions or Comments?Questions or Comments?