3 Ways To Protect Your House From Medicaid: Gift, Life Estate, Medicaid Trust

I recently published an article titled “Don’t Gift Your House To Your Children” which highlighted the pitfalls of gifting your house to your kids versus setting up a Medicaid Trust to own your house, as an asset protection strategy to manage the risk of a long-care care event taking place in the future. That article prompted a few estate attorneys to reach out to me to present a third option which involves gifting your house to your children with a life estate. While the life estate does solve some of the tax issues of gifting the house to your kids with no life estate, there are still issues that persist even with a life estate that can be solved by setting up a Medicaid trust to own your house.

In this article, I will cover the following topics:

• What is a life estate?
• What is the process of gifting your house with a life estate?
• How does the life estate protect your assets from the Medicaid spend-down process?
• Tax issues associated with a life estate
• Control issues associated with a life estate
• Comparing the life estate strategy to setting up a Medicaid Trust to own your house

#medicaidassetprotectiontrust #greenbushfinancial

[NL-srwh]

In the State of Ohio, Life Estates offer minimal protection. There is a chart under the Ohio Revised Code that shows what ownership percentage the Life Tenants still own, despite transferring the property via a Life Estate. My grandparents set up a life estate in 2005. In 2021 after my grandfather died, my grandmother needed nursing care. Despite achieving the 5 year look-back, Medicaid determined she still owned 24% of the life estate property and instructed the family to sell off her position in the Life Estate (who would buy that?) or, sell off parts of the estate until she hit 24%, spend it down, then she would become eligible for Medicaid. Life Estates used to offer protection due to Mediaid recovery rules that indicated only probated assets could be recovered against. That law changed in 2005, removing a lot of the protections Life Estates used to offer.

[jackycane]

In Florida a life estate doesn’t allow the child or the child creditors to have any rights while the homeowner (parent) is alive and have no say at the time of sale of the home. I don’t know how it is in other States. I have very good attorneys in Florida, had a life estate, sold the house and my son didn’t have to approve it, didn’t have to sign since I retained full ownership while alive. It is very important to hire a very good attorney!

[datagirl]

Life Estate Deed established and filed 7 1/2 years ago. No assets other than 2 old vehicles, and $200 in the bank. Tennessee I believe is an expanded recovery state. Only one parent in need of SNF Tenn Care the other parent unable to care for them due to their own health issues. Very confused if the property is safe from recovery or not.

[CandycaneBeyond]

Would my cild not qualify for social benefits because he is named in a trust? Like the Medicaid trust you mentioned in the end? If he is low income and receiving health care from the state, would it be counted as his assets? He can't sell it so im assuming no

[LadyG.]

Here is the situation my Husband is in: New York State - 1985 Grandparents inherited a house, then in 1994 gifted it to my in-laws with the Grandparents paying a gift tax to the IRS - I believe the value of the house was set at $67k for that tax. In March of 2010 my in-laws deeded (gifted) the house to their two children with a Life Use for the parents. Their father passed years ago, and my mother-in-law passed just recently, so the house is being sold - $99, 500. Neither sibling lives in NY, one is in MD the other in PA. As far as I know, the parents did not pay any gift tax when they deeded the house to the kids. I suppose because they had life use? Question: how big of a mess is this going to be? LOL.

[marypohja]

thank you michael . ---question- with the irrevocable trust, you stated that the medicaid 5 year lookback starts with the start of the trust. is that true just in new york?

[scottmoyes]

Here's a situation. Couple buys a house and Mom, who is 87 co-signed on the loan to help the kids qualify. So, Mom is on the Mortgage and Tile to the house. Couple takes care of Mom at home but now wants to place mom in a facility. Mom has no Assets and the house has no equity. No Trust is in place... YET! So, if they place mom in a community that accepts medicaid, can the State put a lien on the kids house? Or what would the options be?

[vcap]

What if house is already in Life Estate for 14 years. Mom has to move to independent living now. If we sell house that money will then start the 5 year lookback all over? Moving from NY to PA

[AlexShantyOldLawModel]

Number 1 Install lawyers who arbiter record monitor validate and certify inheritance and legacy wealth transfers with a Pro Bono backup network and take care of mom and dad at home like they did for grandma and grandpa.

[PAC]

Another example where if you have money to hire an attorney then you can protect your assets. if you do not have the money to protect your assets, you are screwed.

[menochivo]

Okay, as an adult child to a an elderly parent, It seems I would NOT want a step-up in basis! Why? Because my father primary home is also my primary, and I would rather continue with the lower property taxes, and since don't plan on selling the house for the next XX years, hence there seems no value in a step-up basis, and when and IF I decide to sell, ill be exempt 500k for it being my primary anyway. Is this correct thinking? Am I missing something?

[FG-hwep]

Can rental proptery be put into a medicaid irrevocable trust?

[ajmw]

Can my mom sell the property to me at a low price that's it

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