The most important thing we give to our children is having us as parents.
The most important legacy we leave for our children is our example, the values by which we live.
We may be also able to better their life chances through financing their education.
We may also want to give them a step up through “generational wealth.” Few of us are among the Texans who can establish 300 year dynasty trusts. Even fewer of us may see the sense in giving money to someone who, after four generations, is unlikely to even know our name and, after eight generations, may not even share genetic material with us. But many of us would like to leave some sort of financial agency.
For many Texans, this “generational wealth” is the family home.
87% of retired Americans own their own home. Many have wisely paid off the mortgage before they retired. Some, late into their retirement, may take out a reverse mortgage in order to pay for home health care. But for those who do not, or who die owing less on the reverse mortgage than the net resale value of the home, the home can be, and usually is, left to the children.
Leaving your home to your children in your Will is flipping a coin. They may not get it. Reality is that 52-53% of us die in a nursing home, usually receiving Medicaid. Others of us use Medicaid home health care. The Medicaid Estate Recovery program has a right to recover the “loan” for our care before anything passes to our beneficiaries.
If you want to be sure of leaving your home to build “generational wealth,” record a Transfer on Death or Lady Bird Deed in the county deed records.
A Transfer on Death Deed must be signed by you, not by your agent under a Durable Power of Attorney, and can be recorded before your death. It can provide for the home to pass to your children or the children of any predeceased children. It does protect against Medicaid Estate Recovery. But during the first two years after your death, other creditors can seek repayment through a sale of the home.
A Lady Bird Deed (formally called a General Warranty Deed Reserving an Extended Life Estate) can be signed by your agent under a Durable Power of Attorney. It cannot provide for tiered inheritance but can pass the home to a trust which can provide for the home to be sold and the net sale proceeds distributed as you wish. If the Lady Bird Deed is signed by your agent under a Durable Power of Attorney, the home should pass to the people named and in the proportions set forth in your Will. If you do not have a Will, the home should pass to your heirs at law.
Elder law attorney, Terry Garrett, CELA, is a member of the National Academy of Elder Law Attorneys and is an Approved Guardianship Attorney. She assists people in elder law, estate and special needs planning, guardianship and settling estates. She graduated with honors from Cornell University. She was on the Dean’s List at Wharton Business School. She earned her J.D. at Columbia Law School, receiving the Parker Award and a Mellon Fellowship.
