I have done some research on the Internet and read about something called a life estate where my dad could retain the right to live in the home - called a remainder interest. We would like to know if this would be an option for us?
I have also read about the Medicaid Estate Recovery Act. We are wanting to know what can be done to protect ourselves from this if possible.
I have also read where it is permissible for a parent to transfer assets to a child who has lived in the home with the parent for at least two years and provided care to the parent prior to the parent entering the nursing home. How does this work exactly and what affect does this have on the Medicaid Estate Recovery Act?
Your father should consult with an attorney in the area where he lives for specific legal advice regarding what his options are in these circumstances. He can search for an elder law or estate planning attorney.
Estate Planning Attorney
All of the options you mention can be possible means of Medicaid Planning, but it's not possible here to discuss all of them in detail as they apply to your situation. That's why it's important to contact an elder law attorney.
A life estate is a gift of the remainder interest (post-death interest) in the home, therefore it is subject to the five year lookback rule that applies to Medicaid applications. It may also create some capital gains issues for the recipient of the remainder interest.
If a parent transfers or devises (in a will) the residence to a child who cared for the parent AND the parent would have needed to go to assisted living or a nursing home if that care had not been provided, the transfer to the child MAY be exempt from the Medicaid Estate Recovery Act. However, as with your other questions, the answers are very dependent on your particular circumstances and only a qualified attorney can advise you on which options suit you and your father best.