Protecting Assets With Life Estates

By creating a Life Estate in your home, you retain the right to live in the property for the rest of your life and the remainder interest is given to someone else or to a trust. New Hampshire Medicaid and Mass Health view the creation of a Life Estate as making a gift which triggers a disqualification period from Medicaid eligibility.

Advantages to Life Estates:

• Life Estates protect your right to live in and use the property for the duration of your life.
• The property will not have to pass through Probate at your death.
• The children (or whomever the property is gifted to) receive a step-up in basis upon your death.

Disadvantages to Life Estates:

• If the property is sold during your lifetime, you receive a portion of the proceeds proportionate to your life expectancy based on the life expectancy tables. If you are in a nursing home at that time, your share of the proceeds will disqualify you from medical assistance that you might otherwise qualify for or be receiving. In addition, the portion of the proceeds received by the remaindermen might be subject to tax.
• If the property becomes vacant while you are in a nursing home, the home owner’s insurance premium will increase.

The information provided herein is for general purposes only and does not to purport to give specific advice on individual matters. If you want individual advice, contact Mary Howie, an Elder Law and Estate Planning attorney practicing in New Hampshire and Massachusetts. Attorney Howie also holds a master’s degree in business administration and finance. Call her at 603-893-8008.