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Home Ownership Options for Seniors

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For most seniors, the family home is their most important asset and selecting the best ownership option is of critical importance. A senior may ask these questions. “Should I give my home to my children now?” “If I add my children to the title, what happens if they divorce, have creditor problems or become estranged from me?” “How can I make sure my home will escape probate?” “How can I keep my home in the family in the future?” “How can I prevent the loss of my home if I enter a nursing home?” “Will my children have to pay tax if they sell my home after I have passed on?” These are some of the questions you may want answered.

The National Academy of Elder Law Attorneys (NAELA) through its Tax Special Interest Group has prepared this publication as a guide to help you select the best home ownership option in your specific circumstances.

Doing nothing by leaving the home in your name may not be the best solution. Transferring the home outright to loved ones without retaining any control may also be unwise. There are five commonly-used options which fall between the do-nothing and outright transfer extremes. The five options, which are discussed in this publication, include (1) joint ownership, (2) the revocable living trust, (3) the irrevocable living trust with certain powers you retain, (4) a transfer to beneficiaries with a life estate coupled with a special power of appointment retained by you, and (5) a transfer to beneficiaries with a life estate coupled with a power of sale retained by you.

Married couples commonly purchase a home as joint tenants with rights of survivorship which is commonly called “tenancy by entireties” or “survivorship marital property”. While such arrangements do avoid probate upon the death of one spouse, they are not good long-term strategies for married couples.

  1. Joint Ownership – In joint ownership, you sign a deed adding your beneficiaries to the title as “joint tenants with rights of survivorship”. All owners including your named beneficiaries have a present interest and must sign off if you want to sell your home or take out a mortgage loan. Upon your death, title transfers automatically to the other owners without the need for court supervision.
  2. Revocable Living Trust – When you set up a revocable living trust you will have the right to be named as sole trust beneficiary and trustee. When you deed your home into the trust, you retain all rights to the use and control of your home. Your ultimate trust beneficiaries, which you can change, have no say while you are living. Upon your death, the trust beneficiaries acquire the right to receive the home free from court supervision.
  3. Irrevocable Living Trust with Retained Rights – When you set up an irrevocable living trust, you give up the right to amend the trust and you will usually appoint a trusted person (not yourself) as Trustee. When you deed your home into this kind of trust, you retain limited rights to control your home. However, you will retain the lifetime right to use your home and a power of appointment to alter the ultimate beneficiaries who will receive the home (called Grantor retained rights). If you want to sell your home or take out a mortgage loan, the Trustee’s consent will be needed. Upon your death, the trust beneficiaries acquire the rights to the home free from court supervision.
  4. Transfer to Beneficiaries but Senior Retains Life Estate and Special Power of Appointment – In this option, you will transfer your home to your beneficiaries, but will retain the lifetime right of exclusive use of your home. This is called a “life estate”. Your beneficiaries cannot interfere with your right of exclusive lifetime use. They have no rights until your passing. You can also retain a “Special Power of Appointment” which allows you to remove a beneficiary from the title if an estrangement, divorce or creditor problem occurs with a beneficiary. Upon your death, your life estate ends and your named beneficiaries own full title to the home free from court supervision.
  5. Transfer to Beneficiaries but Senior Retains Life Estate and Power of Sale – In this option, you will transfer the home to your beneficiaries, but retain a life estate coupled with (1) the power to sell the home without the consent of the beneficiaries and (2) the right to receive the sale proceeds. After your death, your life estate ends and the named beneficiaries own full title to the home free from court supervision. This arrangement is sometimes called a “Lady Bird” deed.

Estate Planning Issues to Consider

Several of the key estate planning issues for you to consider in selecting an ownership option include the ability to (1) maintain control of your home during your lifetime, (2) prevent problems when a loved one is uncooperative, has a creditor problem or divorces, (3) avoid probate after your death, and (4) secure effective long-term family succession after your passing. There are several other important estate planning issues which can be addressed when you consult with an experienced Elder Law Attorney.

Tax Issues to Consider

The preservation of certain lifetime income tax advantages should be considered in selecting an ownership option. These include: (1) preserving the exclusion from capital gains tax when you sell the home and (2) securing the income tax deductions for mortgage interest and property taxes. A key tax advantage to consider after your death is whether your named beneficiaries will be able to exclude tax on pre-death capital gains upon their sale of the home. This is called the step-up in tax basis to fair market value rule.

Also, in some states, the transfer of a home can result in negative property tax consequences, such as the loss of lower homestead millage rates, the loss of state income tax credits and/or an increase in the taxable assessment of the home. You may also be concerned about how an ownership option may impact federal or state estate tax. These issues should also be addressed with an experienced Elder Law Attorney.

Medicaid Qualification Issues to Consider

When a long-term care admission occurs, the risk of losing your home should be assessed. The Medicaid rules create a complicated minefield which requires experienced professional guidance. The federal Medicaid Deficit Reduction Act (DRA), enacted in 2006, imposes a 60-month look-back rule which will apply to completed transfers of the home. Medicaid considerations may outweigh estate planning and tax considerations. This is because ineffective Medicaid planning may result in the complete loss of your home or its value whereas the results from estate or tax planning mistakes will usually be less disastrous.

There are four ways in which your home or its value can be lost if Medicaid is needed to help pay the cost of long-term care. First, setting up an ownership option may result in your home no longer being an exempt asset. Second, an ownership option may trigger a divestment penalty period of Medicaid disqualification if the transfer is not in place for 60 months or more. Third, the Medicaid rules may discourage you from keeping your home. This is because almost all of your monthly fixed income will have to be spent for your care in a nursing home and will not be available to pay for the on-going costs to maintain the home. As a result, your home may have to be sold, and the proceeds will be subject to spend-down. Fourth, after your death, your state’s Estate Recovery program may require that your home or its value be used to reimburse the state for its Medicaid payments.

There are several other Medicaid issues which can be addressed when you consult with an experienced Elder Law Attorney.

The good news is that advance Medicaid planning can, in most cases, protect your home. Also, if there is a spouse at home, the home will usually enjoy automatic protection as long as your spouse remains healthy.

Medicaid planning for your home will depend on the kind of Estate Recovery program your state has, whether there will be a healthy at-home spouse, whether your good health is likely to last for the next 60 months, and whether you have loved ones who can be trusted to take corrective action if necessary.


In conclusion, deliberate consideration of these issues, tailored to your specific needs, is critical. Consultation with an experienced Elder Law Attorney, active with the National academy of Elder Law Attorneys (NAELA), is advised for your peace of mind. Also keep in mind that laws will change and so will your personal circumstances. You will need to update your plan in the future by meeting with your Elder Law Attorney. Check out the NAELA website at or call 520-881-4005 for a referral.


The above comparative analysis is only general in nature and should not be relied upon in a specific application. The primary author of this publication is Robert C. Anderson CELA*, Chair of the Tax Special Interest Group of NAELA. Other contributing NAELA members include Timothy Crawford CELA, Sharon Gruer CELA, Steve Silverberg CELA, Steve Perlis, Hy Darling, Harley Manela, Doug Chalgian CELA, Ben Neiburger, Dennis Sandoval CELA, Andrew Hook CELA, H. Clyde Farrell, Ed Daniel CELA, and Jerry Townsend.

*Certified Elder Law Attorney, a designation of the National Elder Law Foundation which is accredited by the ABA

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