What was the best holiday gift you ever received? Mine was a doll with red braids perched on top of a shiny new sleigh under the Christmas tree. But there is one gift that won’t fit under the Christmas tree, and that’s the gift of a home.

Many people wonder if it is a good idea to give their home to their children. What may seem like a great idea in order to avoid taxes or help out the kids frequently is not. First, there is a real emotional concern that needs to be considered before signing over your home to your child, especially if your intention is to continue living in the home.

What if your child gets divorced and the house becomes an asset that the ex-spouse has a legitimate claim on? Or if your child has financial problems and their creditors place a lien on the property or the very worst thing is if your child sells the house out from under you?

Many people think that a home transfer is a good way to preserve wealth and to help you in the future to qualify for Medicaid in the event of the necessity of long term care. However, if you apply for Medicaid within five years of gifting your home to your children, Medicaid presumes that the gift was made in order to qualify for Medicaid. They will then be looking at the home’s value to pay for those services. In addition, Medicaid could also discount the five-year rule if the homeowner is transferring title to a spouse or child who has been living in the house and providing the applicant nursing care for at least two years.

And there is more. If your children sell the house right away, they may be facing steep taxes because when you give away your property the tax basis, which is the original cost of the property, becomes the tax basis for the recipient. For example, if the house was purchased for $150,000 and is now worth $350,000, when the children sell the house, they will have to pay capital gains on the difference between the $150,000 basis and the selling price.

The capital gains can be avoided if they are living in the house for two years before selling. This would of course have to be verified and confirmed that it was their primary residence. This differs from standard inherited property where the cost basis is stepped up allowing an immediate sale with less of a tax impact.

Right now, under current law you can gift a total of $5.43 million over your lifetime without incurring a gift tax. And you can give anyone property valued at $14,000 or less annually without paying gift tax. However, all of this will probably be changed very soon. The new administration has made it clear that one of the first changes that they will be making is reversing the death tax. So, the concept of gifting your home to avoid taxes will have to be reviewed, however, the Medicare five-year rule will unlikely change.

The trick here is timing and predicting what Congress will do. At this stage, conservative financial advisors and accountants would probably advise their clients not to make any moves until the new federal regulations are clear. Since seeking the advice of professionals is always important, that is where you should start before moving the house under the Christmas tree.

Wishing everyone a joyful and peaceful holiday season.