| A life estate problem….read on:
READER QUESTION:
My father applied for and received Medicaid in December 2024. He currently resides in a nursing home (and if he wasn’t so stubborn, he could have used your advice. But that is a long story).
My question concerns the house that he has in a life estate and I will own when he dies. The contract states that he is responsible for all the bills, taxes, and maintenance, but Medicaid made him spend down all of his funds. How do I handle the house now? He refused to spend any money on the house and let it fall into disrepair. Can I legally fix it up? Can I move in even though he isn’t deceased? I’m sure I am not the only person who finds themselves in this type of situation.
MY RESPONSE:
A life estate is created when you transfer your house to your kids but retain the right to live there for the rest of your life. Medicaid treats this as a transfer subject to a 5-year look-back. After 5 years the house is protected from Medicaid and Medicaid cannot force the sale.
I rarely do these life estates because you will have tax and Medicaid problems if you were to sell it during your dad’s lifetime. An irrevocable Medicaid trust solves these problems but that ship sailed in your case.
At this point, you have the option of fixing up the house with your own money. If you use your money to fix up the house you will be fine unless the house is sold during your dad’s lifetime, in which case you would not fully recoup your investment.
You also have the option to live in the house (with Dad’s permission); and you have the option of renting the house out, although Dad would get the net profits and have to turn it over to the nursing home.
I hope this helps. |
