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Life estate as planning tool

I am interested in setting up a life estate for me and transferring ownership of my home to my only child. I like this approach because, from what I have heard, it helps with medicaid planning, avoids probate, but also leaves me in charge of my own property. How would I do this? Is it easy to do?

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I know readers don't like this answer but, honestly, we are talking about a very valuable asset, and no matter what strategy you ultimately adopt, there are serious estate planning and tax issues that must be taken into account.  You should check with an experienced estate planning or elder law attorney before deciding, and talk to him or her about an overall strategy that will take care of all your planning issues. 
Having said that, you are correct, the life estate is a simple and inexpensive way to do some serious planning. The way it works is you sign and record a deed (assuming you are the only owner) that creates a new ownership structure with you as the Life Tenant Owner and your child as the Remainder Owner.  And you are right:  You will still be in control of the property with the exclusive right to use the property or to collect any income (rent) from the property during your lifetime.  Of course, you also remain responsible for taxes, maintenance, and insurance.
When you die, your child will become the new owner of the property and, as you suggested, probate is avoided (at least with respect to the real estate in question).  Before that time, however, unlike with joint ownership, any problems encountered by your child (debt, law suits, divorce, etc.) will not have any impact on you or your enjoyment of the home.
As for your wish to protect the property from Medicaid claims, the life estate form of ownership will help with that AFTER the 60 month look-back period has expired.  Accordingly, if you are healthy and do not anticipate needing Medicaid for the next five years, it might work for you.
There are also some negative ramifications to consider.  For example, if you try to sell the property during your lifetime, you will not be eligible for the entire income tax exemption that is typically enjoyed by those selling their primary residence.  Also, you do lose a little bit of control because, for example, if you decide you would like to take out a mortgage or a home equity loan, you will need to get your child's signature (i.e., permission).
Good luck, and please tell your friends about The Forum.

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