Planning to Protect the Big House

Our client came to see us with one of her sons with the goal of protecting her large house for herself and her family of five children. She is in her mid-70s and in good health. Her husband had passed away a few years earlier.

The house is her sole substantial asset. It's much too big for her, though one of her sons and his family also live there. She hopes to remain in her home until her grandson graduates from high school, but then she may sell and move to a smaller house or condominium. Another possibility we discussed is to divide the house into condominiums, as developers have done with many of the larger houses in her neighborhood, but that would take more capital than our client can afford.

Our client is sure, however, that she wants to protect this one asset for her family. In light of the DRA, it is more important than ever that she take action now. This is for two reasons: First, the house exceeds the new limit of $750,000 on the value of a personal residence. Second, any transfer causes five years of ineligibility for MassHealth benefits, as opposed to three years for non-trust transfers under the pre-DRA rules.

The plan we devised for our client had two elements. She transferred her home into an irrevocable trust which will protect it for herself and her family. And she purchased long-term care insurance. This will cover her for the next five years in case she requires nursing home care during that time. Her children are paying the premiums over those five years, a small price to pay to protect a $750,000 asset. At the end of five years, the family will decide together whether to keep the policy or let it lapse. Ultimately, we were able to protect both her home and her peace of mind.

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