I am being told to transfer a parent’s brokerage account to me to qualify them for Medicaid. Do I need to sell the underlying investments for this to happen?

Obtaining eligibility for Medicaid often requires transferring assets to a spouse or other family members.  When transferring assets, one must always consider the tax consequences of doing so.  Obviously, there are many types of assets and each asset class may be treated differently from a tax perspective.

There is no simple answer to your question.  Depending on the individual tax situations of both the grantor and grantee, it might make sense to sell the underlying assets, while in other instances, it might make sense to transfer the brokerage account without selling the underlying assets.

It is important to work with someone who understands how to calculate the capital gain on the sale or transfer of a capital asset, such as a house or shares of stock.  That same person must also be mindful as to when ordinary income could be triggered from the sale or transfer of an ordinary asset, such as an annuity.  I am both an elder law attorney and accountant.

A very common mistake is to simply transfer your house to your children without using a trust.  By doing so, you eliminate certain tax benefits that your children would ordinarily be able to recognize upon the sale of your house after your death.

Questions may be submitted to smd@mfd-law.com for a response.