[WSBAPT] Life estate and Medicaid question

Thu Aug 27 18:25:58 PDT 2020

As a practical matter, Medicaid can just value the life estate and count that as an asset.  Is the high threshold for real estate holdings not applicable to life estates?

Roger Hawkes, WSBA # 5173
Shoreline Office: 19944 Ballinger Way NE
                                Shoreline, WA 98155
Sultan Office:        423 Main
                                 Sultan, WA 98294

Phone: 206 367 5000; fax: 206 367 4005
Email: roger at law-hawks.com<mailto:roger at law-hawks.com>
Web site: www.hawkeslawfirm.com<http://www.hawkeslawfirm.com>

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From: wsbapt-bounces at lists.wsbarppt.com <wsbapt-bounces at lists.wsbarppt.com> On Behalf Of Marcus Fry
Sent: Thursday, August 27, 2020 2:46 PM
To: WSBA Probate & Trust Listserv <wsbapt at lists.wsbarppt.com>
Subject: Re: [WSBAPT] Life estate and Medicaid question

Interest in life estate is recoverable in Medicaid.  Your client should be doing a special needs trust, that directs trustee to provide housing for CIR (I usually include provisions that beneficiary is responsible for taxes, insurance utilities and minor repairs in connection with right to reside) and if CIR no longer needs housing, then house is sold and X% goes to Y group of individuals and the remainder stays in the trust for benefit of CIR.

SNTs can be first party or third party.  This situation calls for a third party (because the trust is funded with assets of someone other than the beneficiary), so the beneficiary's age is irrelevant.

Marcus J. Fry
Lyon, Weigand & Gustafson, P.S.
P.O. Box 1689
Yakima, Washington  98907
Telephone:  (509) 248-7220
Facsimile:  (509) 575-1883

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From: wsbapt-bounces at lists.wsbarppt.com<mailto:wsbapt-bounces at lists.wsbarppt.com> [mailto:wsbapt-bounces at lists.wsbarppt.com] On Behalf Of Candace Wilkerson
Sent: Thursday, August 27, 2020 2:22 PM
To: WSBA Probate & Trust Listserv
Subject: [WSBAPT] Life estate and Medicaid question

Hi Listmates,

I have a WA client who wants to leave a life estate for her CIR partner in her will, allowing him to live in the house titled in her name after her death as long as he wishes to do so (he is to pay the home's expenses, including the property taxes-mortgage is paid off).  She also wants to leave him a percentage of the house sale proceeds if he leaves the house before his death, at which time the house is to be sold.  The problem, as I see it, is that it's entirely likely that her partner will need to go on Medicaid for long-term care at some point around the time he might receive the life estate and/or the proceeds.  He is already in his late 60s.

Question 1:

Would a life estate be considered a possessory interest that might disqualify her partner from receiving Medicaid benefits?  It doesn't seem like it, since if he needs long-term care most likely he would be moving out of the house anyway.

Question 2:

If he is already over 65 years old, could she still create a third-party special needs trust for his benefit into which to place the house sale proceeds going to him?  And if so, could she simply make this provision in her will for the creation of the SNT if needed after her death?  I have worked with SNTs for people under 65, but wasn't clear on whether they could still be created by a third party for someone over that age.

Thanks in advance!
Candace

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Candace Wilkerson  | Senior Associate  |  Wong Fleming

10675 Willows Road NE, Suite 250  |  Redmond, WA 98052
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