Tag Archives: Medicaid

Life Estate Deeds and Recovery by Medicaid

15 Dec

Clarification on NY State Explanation

Many seniors transfer their homes or other real estate to family members and retain the right to reside in, use and occupy the home or real property. This retained right is called “a life estate”. The life estate permits the senior to also retain real property tax reductions (STAR, Veterans exemption) if they live in the home – called “a homestead”.

Under Medicaid law prior to at least September 2011, at the death of the life estate owner, no recovery was permitted to Medicaid for benefits paid on behalf of the recipient. This was because the life estate was considered to have ‘died’ along with the deceased senior.

Now Medicaid can recover against the life estate and seek repayment from the remainder family members listed on the deed after the recipient and their spouse have both died.

To do this, Medicaid must determine the life estate interest value based upon:

The home’s value as of the date of death of the Medicaid recipient

Age of the Medicaid recipient the day before their death; and

An Internal Revenue Service table which combines an interest rate for the month of death and age of the life estate owner to calculate a percentage or factor of the life estate owner compared to the whole property.

For example, according to the IRS, an 86 year old who dies in November 2011, will own about 7% of the home at the time of their death. If the home is worth $450,000, the maximum Medicaid may recover is about $34,000, even if the actual Medicaid benefits paid during the recipient senior’s lifetime exceed this sum.

Recovery is postponed (deferred) against a homestead in any of these scenarios:

There is a surviving spouse; or,

A sibling of the recipient with an equity (ownership) interest has lived in the home at least one year; or

A care giver child has lived in the home at least 2 years; or

While a disabled child of any age lives in the home; or

While a minor under the age of 21 years lives in the home.


If you need further clarification, contact an attorney or call Tradition Title Agency for the name of an attorney who will be able to help.

Q. What is a Trust?

5 Jul


A. A trust is an arrangement by which you transfer ownership of your property into a trust throughout the course of your lifetime. To fully understand how a trust operates, let’s take a look at the four main components:

  1. Grantor – the creator of the trust
  2. Trustee – the person or entity that distributes and manages the trust property according to the trust documents 
  3. Trust Assets – property transferred into the trust
  4. Beneficiaries – those who receive the benefits of the trust

Q. Are there different types of Trusts?

A. Yes. Once you understand the primary mechanisms that make up a trust, you’ll need to be aware of the different types of trusts. Trusts can be designed for many different financial and personal situations. The most common trusts are: credit shelter, incentive, generation-skipping, QTIP and revocable (living) and irrevocable trusts. However, the most common of these are the revocable and irrevocable trusts.

Q. What is a Revocable Trust?

A. Unlike a will, which comes into play only after you die, the living trust can start benefiting you while you are still alive. The trust is revocable in nature, which allows you to make changes to fit your personal situation. It is established by a written agreement or declaration that appoints a trustee to manage and administer the property of the grantor. As long as you’re a competent adult, you can establish one. In essence, the trust is like a rulebook for how your assets are to be handled when you die. As the grantor, or creator of the trust, you can name any competent adult as your trustee – (some people prefer to choose a bank to fill this role).

Q. What about an Irrevocable Living Trust?

A. An Irrevocable Living Trust is created by a written agreement between you and the person you choose to manage the assets in the Trust. The terms of the Trust Agreement should be tailored to meet your specific needs and objectives. On your death, your trust assets will be distributed directly to your named beneficiaries without the costs, problems, publicity, or delays of Probate. All of the assets in the Trust are governed by the Trust Agreement signed by you and your Trustee. The terms of the Trust Agreement are critical in order to protect assets in the event of a catastrophic illness. The state and federal Medicaid laws have stringent requirements pertaining to Trusts. Assets in Trusts failing to meet these regulatory standards will become vulnerable in determining Medicaid eligibility.


1 Apr

  Q. What is a “Life Estate”?


A. A “life estate” is an estate whose duration is limited to the life of an individual (usually the party holding the life estate), and a legal arrangement whereby the “life tenant” during his or her life retains use (the rights to rents and profits), possession of the property and costs of maintaining the property. The life tenant cannot sell, take a mortgage against or waste the property without the consent of the owners (known as remainderman in most states) and conversely, the owners cannot sell, mortgage or waste the property without the life tenant’s permission.

Q. What are some Benefits of a Life Estate?A. The life tenant has the legal right to remain in the house for as long as they live, whereas, if he or she transferred the house outright, the new owner could legally sell or mortgage the property the next day forcing the previous owner (you) to vacate the premises and it is useful for Medicaid eligibility and protection from Medicaid recovery by New York State as shown in the following example: 

Jane Doe, a 69-year-old widow, owns a home in Westchester County, New York with a fair market value of $250,000.00. Her home is her most valuable asset which she wants to leave to her son. Jane has a progressive illness which renders her ineligible for long term care insurance. Therefore, she may have to apply for Medicaid as her health declines. By drafting a deed which retains a life estate for Jane with the remainder to her son, the following can be accomplished:

a) For Medicaid eligibility purposes, the transfer to Jane’s son is not the property’s fair market value of $250,000.00. Instead the value of the transfer of the remainder to the son is only $94,785.00. If Jane had simply transferred the house to her son she would not be eligible to receive Medicaid until 60 months from the date the deed is executed. By retaining a life estate, Jane will be eligible to receive Medicaid after only 14 months have passed from the date of the execution of the deed;

b) A life estate is a “limited interest in real property”, meaning New York State will not require Jane to sell the property, nor will the state place a lien on the property as a condition of paying a nursing home Medicaid for Jane’s care;

c) Medicaid laws in New York limit recovery to probate assets of the Medicaid recipient or her spouse (in our example Jane is a widow). Since the life estate is extinguished upon Jane’s death, the property passes to her son out of probate and is therefore not recoverable by the state; and

d) Jane remains for purposes of real property tax administration and therefore continues to qualify for the STAR exemption, veteran’s benefits and any other property tax reduction available to the “owner” of the property.

Learn more about Life Estates on our website www.TraditionTA.com or call and talk to us at 631-328-4410.