When a person seeks to apply for Medicaid benefits, one question that they will have to answer is whether they have transferred property for less than fair market value within the last 5 years. It could trigger the Medicaid Transfer Penalty. To learn more about capital gains taxes, click here for an interview I did with Pat Dillon on this topic.įourth, this type of transfer could cause several issues related to Medicaid. If property is transferred prior to death, the heir will not receive this step up in basis. Generally, if property is passed by will at a person’s death, the heir receives a step up in basis for capital gains tax purposes, thus likely decreasing the capital gains taxes that would be owed if the property is sold. Third, another potential negative tax consequence of this type of lifetime transfer occurs as it relates to capital gains taxes. To learn more about estate and gift taxes, click here for a podcast I did with Kitt Tovar on these topics.
#Conveyance of property to a trust texas professional#
It is critical that a landowner consult with a tax professional before making a decision to gift during his or her lifetime. If property is deeded during a person’s lifetime, that may have gift tax consequences and may also affect the landowner’s lifetime exemption with regard to estate taxes. Second, there are tax implications of making this type of lifetime transfer. Similarly, if the heir decides that he or she wants to do something with the property that the landowner disapproves of–like selling the land, for example–the landowner has no say over that decision because the land is owned by the heir. This means if the landowner gets angry at the heir, he or she cannot take back the transfer. There are also downsides to deeding property to another person while the landowner is still living.įirst, once the property is deeded, the landowner has no more control and the deed is irrevocable. It would also decrease certain expenses for the landowner, such as property taxes since the land would no longer be in his or her name.Ĭons of Transferring Property Prior to Death It would ensure that the asset involved would not be part of the landowner’s taxable estate when calculating potential federal estate tax liability. This may be important for a number of reasons including qualifying for Medicaid and avoiding Medicaid Estate Recovery Program. Third, this is a way to get land out of the landowner’s name. Even though the probate process here in Texas is not nearly as complex as some other states, it is a process that can take time, effort, and money to complete.
Second, it allows the land to pass without going through the probate process.
There are certainly advantages to deeding property prior to one’s death, rather than waiting for that property to pass by will.įirst, it is done and the landowner no long has to worry about it! It can also allow the landowner the enjoyment of watching the next generation take over and begin operating the family farm or ranch that the next generation now owns. Pros of Transferring Property Prior to Death Photo by Britt Fisk, Bell Road Beef, Clayton, NM
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