My Parents Want To Leave Me Their House . . .

[Tom D.]

My parents have made a will leaving me their home. They're in relatively good health, however, I've read horror stories of families losing homes to medicare. So, I asked them to meet with a lawyer, thinking a living trust would be the way to go. To my surprise, he recommends just transferring it to me right now, with protection by way of a one million dollar umbrella policy.

Any suggestions? I'm unfamiliar with elder law, and I'm not a big RE investor, I just own my own duplex right now. Has anyone here dealt with a similar situation that can share some advice?

[Dave Toelkes]

Any horror story you heard about Medicare is just a "story". No one I know ever lost their home to Medicare.

Transferring to you right now is the absolute worst advice your parents could have received. You lose the step up in basis and your parents surrender ownership of their home before they die. What would keep you from having a falling out with your parents, then selling the house out from under them? If you get into financial trouble and go into Chapter 7 -- you also lose the house where your parents are living. Really bad advice from this attorney.

Remember, inheritances only happen when someone dies. No problem with inheriting at your parent's stepped up basis. The issue here is inheritance will have to go through probate and depending upon your state, probate costs could get expensive.

In my state of SC, the court costs for probate are quite cheap. And for a simple estate, where you are the only heir, you can administer the probate yourself -- no attorney needed.

If your parents (or the property you are to inherit) are in a state where probate costs based on the value of the estate can be expensive, then the way to avoid probate is to use a living trust as the title transfer vehicle. What you and your parents should do is a cost benefit analysis. Calculate the probable probate costs for your inheritance and see if they are significantly greater than the cost of setting up a trust.

Nothing wrong with a trust. I think you and your parents should be sure that you will really benefit from a trust before you spend the money to set one up.