The Listen to Lawrence Letter: Protecting the Family Home

August 18, 2023
August 17, 2023 • Volume 4 Issue 165
The most common question we get…read on:


Hi Lawrence. My girlfriend’s mom is 82. Her husband is deceased. The house she lives in with her daughter was built in 1991. My girlfriend also has a brother who doesn’t live with them. I’m not sure what the cost basis was to build the house. Probably safe to say about $100,000. There is $77,000 owed on the house from an equity loan taken out about 20 years ago. The house is valued at about $450,000 now. What would be the best way to protect the house if she had to go into a nursing home? She has no other assets and gets social security which I know Medicaid will take. I keep hearing things that the owner should put the house in a living trust and name her 2 children as beneficiaries so that when she passes, the house will avoid probate and the 2 children can sell the house and avoid capital gains tax. Is this the right way to go about this? Thanks for your help and enjoy reading all your emails.


Protecting the family home is the number one goal for the majority of my elder law clients. Remember, our wealthy clients don’t worry about this as they have ample funds to pay for whatever care they may need. Wealthy clients are more interested in good family and tax planning. Working and middle-class clients can get wiped out if they need long-term care, so protecting their home (perhaps their biggest asset) becomes of paramount importance.

An irrevocable living trust is the most popular tool in the toolshed to protect the family home (and other assets). Here we would create the trust, transfer the deed into the trust, and then 5 years later the house would be protected. With this plan, your girlfriend’s mother would be guaranteed that she has the right to live in the house for the rest of her life while keeping her property tax exemptions and tax write-offs. At death, the trust would avoid probate and all capital gains would be eliminated. This is the most common solution to the problem.

It may or may not be the best plan for your girlfriend’s mom. There is an exception to the 5-year look back if the house is transferred to a child who has lived in the house with the parent for 2 years AND provided care keeping the parent out of a nursing home. This exception should be explored, taking into account taxes, the brother, and all the other facts and circumstances of this case. So, there may be a way to protect the house without having to wait out the 5 year look back.

The bottom line then is that I cannot give a quick answer to your question in this forum. Please call to set up a full consultation with me to discuss all the options and their inherent pros and cons.

Yes, it is complicated.

I hope this helps! Please forward this information to your friends and relatives to share these informative answers to some very commonly asked questions.


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