Medicaid Policy
Medicaid Policy
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Aged, Blind, Disabled and Long-term Care
A life estate conveys upon an individual or individuals for his or her lifetime certain rights in property. The owner of a life estate has the right of possession, the right to use the property, and the right to sell the life estate. In most cases, the individual does NOT have title to the property and does NOT have the right to sell the property itself. If an individual has transferred an exempt home to someone else, and retained a life estate, a transfer for less than fair market value has usually occurred. The life estate is not as valuable as the property itself. The amount of the transfer is the difference between the value of the property and the value of the life estate. See Section 575 to determine if a penalty period would apply.
Some life estates are created with powers. This means the owner of the property creates a life estate for him or herself and retains the power to sell the property, with a remainder interest going to someone else when the life estate holder dies. Since the life estate holder has the right to sell the property, its value is the full equity value of the property. Therefore, unless the property is excluded for another reason, count the full equity value of the property as an available resource.
To determine the value of a life estate without powers, follow the steps below.
Determine the current market value of the property by contacting a knowledgeable source which include:
Real Estate brokers.
The local office of the Farmer's Home Administration (for rural land).
The local office for the Agricultural Stabilization and Conservation Service (for rural land).
Banks, savings and loan associations, mortgage companies, and similar lending institutions.
Use Table VI.
Find the claimant's age as of last birthday.
Multiply the figure in the life estate column for that age by the current market value of the property to determine the value of the life estate.
If the value of the life estate in conjunction with any other countable assets exceeds the allowable asset level, close the case or deny the application.
The individual may refute either the current market value of the property as established in #1 above OR the life estate value as established by using Table VI. If the individual refutes the life estate value, have him document and explain the value as he establishes it. This may require statements of knowledgeable sources as described above and/or medical statements on the actual life expectancy of the life estate owner.
For individuals who need long-term care such as nursing home or waiver services, treat the purchase of a life estate in someone else's home as a transfer of an asset for less than fair market value, unless the purchaser lives in the home for a period of at least 12 consecutive months after the date of the purchase.
If the residency does not last 12 consecutive months, the person has not met this requirement. Apply a penalty based on the entire purchase price. An interruption is any absence from the residence of 30 or more consecutive days.
If the purchase price of the life estate is greater than its market value, a transfer of assets has occurred even if the individual lives in the home for 12 or more months. Compare what the individual paid with the fair market price of the life estate using the life estate tables. Apply a penalty period based on the difference between what the individual paid and the market value of the life estate when the individual has met the 12 month residency requirement but paid more than the market value for the life estate.
Medically Needy Family, Child, and Pregnant Woman
Do not consider the life estate interest as an available asset. However, count any income produced by the life estate.