What is a Life Estate?

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On Behalf of: Hatley Law Group, APC | POSTED ON: December 15, 2022

A life estate is a type of property ownership that divides the control and ownership of a property. The person who creates the life estate for their home and assets is known as the "life tenant." While a tenant retains control of the property, he or she shares ownership during their lifetime with the remainderman (the estate's heir).

Quicken Loans' recent article entitled "What Is A Life Estate And What Property Rights Does It Confer?" explains that while the life tenant lives, they're in control of the property in all respects, except they can't sell or encumber the property without the consent of the remaindermen. After the life tenant passes away, the remainderman inherits the property and avoids probate. This popular estate planning tool automatically transfers ownership at the life tenant's death to their heirs.

The life estate deed shows the terms of the life estate. Upon the life tenant's death, the heir must only provide the death certificate to the county clerk to assume total ownership of the property.

Medicaid can play an essential role in many older adults' lives, giving them the financial support needed for nursing facilities, home health care, and more. However, the government considers your assets when calculating Medicaid eligibility. As a result, owning a home – or selling it and keeping the proceeds – could impact those benefits. Most states will use a five-year look-back period when determining your eligibility for Medicaid. This means they will total up all the assets you've held, sold, or transferred over the last five years. If the value of these assets passes above a certain threshold, you'll likely be ineligible for Medicaid assistance.

However, a life estate can help elderly property owners avoid selling their homes to pay for nursing home expenses. If your life estate deed was established more than five years before you first apply for benefits, the homeownership transfer would not count against you for Medicaid eligibility purposes.

To ensure you're correctly navigating qualifying for Medicaid, it's wise to discuss your situation with an attorney specializing in Medicaid issues. Book a call with estate planning attorney Rod Hatley today.

Reference: Quicken Loans (Aug. 9, 2022) "What Is A Life Estate And What Property Rights Does It Confer?"

Suggested Key Terms: Estate Planning Lawyer, Medicaid, Probate Court, Inheritance, Asset Protection, Probate Attorney, Life Estate

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San Diego, CA 92130-2071

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