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2 reasons your children may not be able to inherit your home

On Behalf of | Aug 1, 2023 | Estate Planning

The financial resources that you have acquired throughout your life will become part of your estate when you die. If you are like most parents, you probably hope that your children will ultimately inherit anything remaining at your death. For most people, their home is the most valuable asset they possess. They may want their children to eventually live there, or to sell the home and receive the proceeds when they die. Unfortunately, if people do not plan ahead carefully, their loved ones may not inherit what they had hoped for. There are individuals and entities that could potentially bring a claim against your estate, force the sale of your home and diminish or eliminate inheritances.

The Medicaid estate recovery program

Many older adults turn to Medicaid when their health declines, as Medicare does not cover extensive nursing support or long-term care. In Colorado, your home equity usually will not prevent you from qualifying for Medicaid benefits when you need financial assistance to pay for your care. However, under the estate recovery program, following your death (and your spouse’s), the state can lien the home (as well as file claims against other assets) to recoup the Medicaid expenditures made on your behalf. There are planning strategies designed to avoid this result, but they can be complicated, and should always involve assistance from a qualified elder law attorney.

Any personal creditors

The state of Colorado is not the only party that could force the sale of real property during probate proceedings. Creditors owed money when you die have a right to repayment from your estate before beneficiaries receive any property. This can include mortgage lenders, credit card companies, hospitals and any other creditors, all of which diminish your legacy.

Addressing Medicaid and asset protection needs in advance can benefit you and your heirs if you have property that you want to pass on to the next generation.