[WSBAPT] life estate

[James Bates]

Hi Rachel,

Just to be clear, a life estate is a hybrid for Medicaid purposes.  It is both a resource (the life estate interest) and a transfer (the remainder interest.)  In your facts, it is the potential Medicaid recipient’s home and probably an exempt resource, so you are correct that it would cause a transfer penalty and allow for an estate recovery to take plane upon death and/or a estate recovery lien to be attached.  I would not be so bold as to state that “the life estate holder won’t be eligible for Medicaid for 5 years” but it certainly is possible depending on how the numbers work out.

In case you would like to run the numbers before your meeting with the client, the table to determine the life interest can be found here:

https://www.hca.wa.gov/free-or-low-cost-health-care/program-administration/determining-value-life-estates

James Bates, Attorney
Luce & Associates, P.S.
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From: wsbapt-bounces at lists.wsbarppt.com [mailto:wsbapt-bounces at lists.wsbarppt.com] On Behalf Of Rachel Edmiston
Sent: Tuesday, December 19, 2017 11:29 AM
To: WSBA Probate & Trust Listserv <wsbapt at lists.wsbarppt.com>
Subject: Re: [WSBAPT] life estate


So, let me see if I’ve got this right.  The problems with a life estate are that the person receiving the house has to pay a gift tax, the life estate holder won’t be eligible for Medicaid for 5 years, Medicaid can recoup some costs by putting a lien on the life estate holder’s house, all parties would have to consent to selling the property and would be entitled to the proceeds, and if there’s a debt due, the grantor would pay an excise tax.  But there is a step up in tax basis when the holder of the life estate dies and the house doesn’t have to go through probate.  Is that right?  I’ve tried talking the client into a TODD before, but based on this discussion, I think I’ll try again.

Thank you,

Rachel Edmiston
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