Skip to content

Residence Transfer Subject to Life Estate: Medicaid Planning

August 18, 2011

Residence Transfer Subject to Life Estate: Medicaid Planning

Definition

With this Medicaid planning tool, you transfer the “remainder interest” in your house to your children (or other beneficiaries) and retain a “life estate” for yourself. A life estate gives you the legal right to live in the house for life. At your death, the home automatically passes to the remainder beneficiaries outright.

A transfer subject to a life estate can help you qualify for Medicaid by removing the remainder interest as a countable asset for Medicaid eligibility purposes at the end of any ineligibility period. Further, any period of ineligibility will be shorter than if you had transferred the home entirely.
Key Strengths

  • Preserves your right to live in the property for life
  • Avoids probate
  • Preserves assets for your loved ones (in some states)
  • Helps you qualify for Medicaid
  • Minimizes gift tax on the transfer (depending on the value of the remainder interest and the amount of your unused applicable exclusion amount)
  • Provides the remainder beneficiaries with a stepped-up basis

Key Tradeoffs

  • Loss of control over asset
  • Value of life estate may be subject to Medicaid estate recovery in some states
  • Sale of the home during your lifetime may be problematic

Variations from State to State

  • Value of life estate may be subject to Medicaid estate recovery in some states–check the laws of your state

How Is It Implemented?

  • Gather information about your income, assets, and transfers of same for the past five years
  • Consult a Medicaid law attorney

This material was prepared by Broadridge Investor Communication Solutions, Inc., and does not necessarily represent the views of The Retirement Group or FSC Financial Corp. This information should not be construed as investment advice. Neither the named Representatives nor Broker/Dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information or call 800-900-5867.

The Retirement Group is not affiliated with nor endorsed by fidelity.com, netbenefits.fidelity.com, hewitt.com, resources.hewitt.com,  access.att.com, ING Retirement, AT&T, Qwest, Chevron, Hughes, Northrop Grumman, Raytheon, ExxonMobil, Glaxosmithkline, Merck, Pfizer, Verizon, Bank of America, Alcatel-Lucent or by your employer. We are an independent financial advisory group that specializes in transition planning and lump sum distribution. Please call our office at 800-900-5867 if you have additional questions or need help in the retirement planning process.

The Retirement Group is a Registered Investment Advisor not affiliated with  FSC Securities and may be reached at www.theretirementgroup.com.

Sponsored Ad

Comments are closed.

%d bloggers like this: