As you approach or enjoy retirement, you’ve likely given some thought to how your property and assets will be passed on to your heirs. If you’re currently receiving Social Security and Medicare benefits, it’s important to understand how those benefits interact with your estate planning. Transferring property to your children or loved ones isn’t as simple as signing over a deed — it requires strategy, timing, and legal foresight.
At Allenby Law in San Diego, we specialize in simplifying complex estate planning decisions. Will walk you through the key considerations and smart legal options available to efficiently transfer property to your heirs without jeopardizing your current benefits.
Understanding the Basics: Social Security and Medicare
First, let’s clarify what’s at stake:
- Social Security Retirement Benefits are not means-tested, which means they are not affected by how much money or property you own. These benefits are based on your work history and contributions to the Social Security system over your lifetime.
- Medicare is a federal health insurance program for people 65 and older (or those with qualifying disabilities), and like Social Security, it’s not means-tested. You don’t lose Medicare benefits just because you own property or give it away.
However, complications can arise when:
- You or your spouse might later need long-term care, and you apply for Medi-Cal (California’s Medicaid program), which is means-tested.
- You fail to plan properly, and your estate must go through probate, delaying inheritance and exposing it to unnecessary costs.
- You transfer property improperly and trigger unintended tax consequences or penalties.
The Real Concern: Long-Term Care & Medi-Cal
While Social Security and Medicare may remain untouched by your assets or gifts, Medi-Cal eligibility for long-term care is based on income and asset thresholds. If you ever need skilled nursing care (which Medicare only covers short-term), and you apply for Medi-Cal, certain gifts or property transfers could:
- Disqualify you from benefits temporarily
- Trigger a “look-back period” of up to 30 months
- Allow the state to recover costs from your estate after you pass away
That’s why strategic estate planning is essential, even if your immediate concern is just to pass on a home or other property to your children.
Strategy #1: Use a Revocable Living Trust
A revocable living trust is one of the smartest ways to transfer property to heirs while retaining control during your lifetime. Here’s how it works:
- You place your property (such as your home) into the trust.
- You remain the trustee and can live in or use the property as you wish.
- Upon your death, the property transfers directly to your named beneficiaries without going through probate.
Benefits:
- Keeps the transfer private
- Avoids delays and court involvement
- Helps preserve your eligibility for public benefits (with additional planning)
However, a revocable trust alone won’t protect the property from Medi-Cal recovery. For that, you’ll need to consider other strategies or modifications.
Strategy #2: Consider an Irrevocable Trust
If protecting your home from Medi-Cal recovery is a concern, an irrevocable trust can be useful. This type of trust:
- Removes the asset from your personal ownership
- Prevents it from being counted against Medi-Cal eligibility
- Can avoid estate recovery if structured properly
However, once you place your property into an irrevocable trust, you lose direct control over it. You can’t take it back or change the terms without the trustee’s and beneficiaries’ agreement.
Because this strategy impacts control and flexibility, it’s crucial to work with an experienced estate planning attorney to determine if it’s right for you.
Strategy #3: Use a Transfer on Death Deed (TOD)
In California, a Transfer on Death (TOD) deed — also known as a beneficiary deed — allows you to name someone who will automatically inherit your real estate upon your death.
Pros:
- Simple and affordable
- No probate
- Retain full control of the property during your lifetime
Cons:
- Doesn’t protect against Medi-Cal estate recovery
- May not work well with complex estates or blended families
- Not ideal for transferring multiple types of property
For straightforward estates, a TOD deed can be an efficient option. But for anything more complicated or for those seeking long-term asset protection, a trust is usually better.
Strategy #4: Lifetime Gifting — with Caution
Some people consider gifting their property while still alive. For example, you might deed your house to your child to “get it out of your name.” But this can backfire in several ways:
- Capital Gains Taxes: Your child may have to pay tax on the gain from your original purchase price, rather than receiving a “step-up” in basis at your death.
- Loss of Control: Once you gift it, it’s theirs — they can sell it or use it however they want.
- Medi-Cal Penalties: Gifting property within 30 months of applying for Medi-Cal can trigger a penalty period during which you won’t be eligible for long-term care coverage.
If you’re on Social Security and Medicare now but expect to apply for Medi-Cal later, gifting may not be the right move without additional planning.
Strategy #5: Include a Life Estate in the Deed
A life estate allows you to deed property to someone (like your child), while retaining the right to live in and use the property for the rest of your life. When you pass, ownership transfers to the beneficiary.
Benefits:
- Avoids probate
- Keeps control during your lifetime
- May reduce estate recovery risks
Drawbacks:
- May limit your ability to sell or refinance
- Could still impact Medi-Cal planning
- Could complicate taxes or create conflict if not clearly defined
This strategy walks a delicate line and is best done under the guidance of an attorney who understands how it affects your other benefits.
Tax Implications to Keep in Mind
Efficient property transfer isn’t just about protecting your benefits — it’s also about avoiding unnecessary taxes.
- Step-Up in Basis: When property passes at death (not by gift), heirs receive a “step-up” in value to the fair market value at the time of your death. This can greatly reduce capital gains taxes if they later sell the property.
- Gift Tax: Gifting property above the annual exclusion ($18,000 in 2024) may trigger gift tax reporting requirements — although it likely won’t cause immediate tax due unless you exceed your lifetime exemption (over $13 million currently).
- Property Tax Reassessment: In California, transferring property can trigger a reassessment under Prop 19, unless specific family transfer exemptions apply.
Smart planning ensures you avoid costly tax surprises while preserving as much of your legacy as possible.
When Should You Start Planning?
If you’re already on Social Security and Medicare, the time to plan is now. The earlier you put your strategy in place:
- The more options you have
- The easier it is to avoid disqualification periods
- The more control you retain
Waiting until a crisis (like a medical emergency or Medi-Cal application) severely limits your choices.
How We Can Help
At Allenby Law, we make estate planning smart and simple — especially for those navigating retirement benefits, long-term care, and family property transfers.
We don’t believe in one-size-fits-all solutions. Instead, we help you:
- Understand your full picture, including Social Security, Medicare, and Medi-Cal
- Protect your property from future risks while maintaining current benefits
- Use trusts, deeds, and tax strategies that align with your goals
- Keep the process easy and stress-free, even if your situation is complex
Let us help you create an estate plan that honors your wishes, supports your heirs, and protects your legacy — all without compromising the benefits you’ve earned.
Contact Allenby Law today for a personalized consultation and discover how we can help you transfer your property efficiently, safely, and strategically.
