Life Estates in Estate Planning.
Did you know that there is a way to transfer your home to your kids now, but hold on to your right to live in your house until you pass away? A Life Estate is an express right to possess and/or use real property for the remainder of your life and it can be a great tool to ensure your land or home go to the right people after you are gone.
For example, if you know you want your daughter to have your home after you are gone, but you don’t want her to have to go to court and you don’t want to pay the cost to open a Trust, you can just transfer the property to her now and reserve a Life Estate in the property. The deed is drafted and the property changes hands immediately, but you have a right to live in the house for the remainder of your life. If you pass away, the life estate goes away automatically and the property is already in your daughter’s name.
But you should also be aware of some of the consequences of transferring the property before your death. There may be tax implications as the transfer is immediate. If you are concerned about tax concerns for you or your loved ones, you should contact a CPA or a tax attorney. There may also be an impact on your qualification for certain benefits, such as Medicaid.
Medicaid has a five year look back period to make sure a person has not transferred their assets out of their name in order to qualify for coverage when they would not have otherwise qualified. Any transfer of your property that is not made for market value may disqualify you from Medicaid coverage. Additionally, Medicaid is only available for persons who qualify under an income test and an asset test. In Arkansas, you must have income of less than $2,199.00 (in 2015) and, if you are single or widowed, you cannot own assets worth more than $2,000.00. If you are married, your spouse can claim part of your assets as exempt.
A Life Estate counts as an asset and the value of the Life Estate is calculated using your age and the value of the property. Because Medicaid is only available to persons with less than $2,000.00 of assets (more if you are married), a Life Estate can easily disqualify you from Medicaid. That means Life Estates are generally not good tools for Medicaid planning.
Finally, in some states, a Medicaid lien can attach to the value of a Life Estate, even after your death, but not in Arkansas. Unlike a beneficiary deed, Arkansas does not, at this time, attach Medicaid liens to Life Estates after you pass away.
If you live in or near Jonesboro, Arkansas and need help with estate planning or you believe that you or a loved one may have to go into a nursing home soon, you should contact an Elder Law attorney to ask about Life Estates or other financial planning tools and to figure out what options might be available for you in order to qualify for Medicaid. If you have any questions, please contact Aaron Heller at Owens, Mixon & Gramling, P.A. 1-870-336-6505 or firstname.lastname@example.org