Life Estates as a Medicaid Strategy
Can Mom buy a life estate in her children's home in order to "spend-down" her assets in order to qualify for Medicaid?
What is a Life Estate?Basically, a life estate is a right to live in a home for the remainder of a person's life. When someone buys a life estate, they purchase this right to live in a home until death. Previously worked as a strategy to reduce the amount of a family member's assets so that they could avoid penalties imposed by Medicaid.
Does Mom have to live in the home?Previously, Mom could give a home to her kids and use the transfer of assets to protect herself from transfer penalties without having to ever live there. The gift of money to a family member without any receipt of value in exchange is no longer an acceptable transfer of assets.
Will this work to reduce assets today?Medicaid requires that the Medicaid applicant actually live in the home where the life estate has been purchased. Every State has different exceptions and/or rules regarding Life Estates, asset caps and Homestead property. It is important to speak with an attorney in your community familiar with this area of law.
What asset transfers are acceptable to Medicaid?While every state has particular rules and individual programs, under Federal Law, a transfer of an asset to a spouse for the "sole benefit" of the spouse will not trigger a period of ineligibility for Medicaid Long Term Care Benefits. Additionally, the transfer of resources to a permanently disabled child or blind child or a child or sibling caregiver who resided in the home for a period of time and who continues to reside in the home will avoid a transfer penalty. Speak to an Elder Law professional to determine if your transfer will qualify.