The decision of whether to transfer the home while your mother is still living or to leave it in a will depends on several factors, including potential tax implications, Medicaid considerations, and overall estate planning goals.

Tax Implications:

If your mother transfers the home to a child while she is alive, the child receives the property at its original cost basis (what your mother paid for it). This could lead to significant capital gains taxes if the child sells the property later, as the gain would be calculated based on the difference between the sale price and the original cost basis.

If the home is transferred through a will, the child inherits the property with a “stepped-up basis.” This means the property’s value is reset to its market value at the time of your mother’s death, potentially resulting in far lower capital gains taxes if the home is sold. (Note, however, that your mother's overall tax situation must be taken into account before transferring or not transferring any property.)

Probate Considerations:

Transferring the property through a Will, however, involves probate. Depending on the side of the estate and the complexity, the cost to probate the estate and the delay after your mother's death could be significant.

Other Estate Planning Tools:

With the right type of estate planning, both the tax implications and the probate considerations can be handled. The property could be transferred into a grantor's trust or transferred via beneficiary deed.

Medicaid Considerations:

Medicaid has a five-year “look-back” period that reviews asset transfers to determine eligibility for long-term care benefits. If your mother needs Medicaid within five years of transferring the home, the transfer could be considered a disqualifying gift, affecting her Medicaid eligibility. The transfer can be disqualifying regardless if it is outright or through trust.

Disinheriting Children:

If your mother intends to fully or partially disinherit other children with this transfer it is best to speak to an estate planning attorney. Although parents are not legally obligated to devise their property to their children, disinheriting a child can be challenged based on lack of capacity or undue influence. It is important that the estate planning documents are drafted in such a way to clearly show this intent.