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Isaac Yedid, Esq. & Raymond Zeitoune, Esq.

Those of you who are thinking about applying for Medicaid should first be sure to discuss�essential Medicaid planning tools with your attorney in order to avoid Medicaid liens and�mandatory estate recovery. This is true whether they need Medicaid home care and wish to avoid�mandatory estate recovery, or whether they are planning for nursing home care and wish to avoid�liens and/or mandatory estate recovery. As discussed in previous articles, one strategy entails�transferring the home into an irrevocable Medicaid trust. Another simpler tool (but not always�the best) used to protect the home involves transferring the home to a loved one (as opposed to�an irrevocable Medicaid trust) while retaining a �life estate� in the home. This article will discuss�the benefits and drawbacks of a deed with retained life estate for the elder law client.

Benefits of Deeding Your Home to a Loved One While Retaining a Life Estate:

• A legal life estate allows the life estate holder the absolute and exclusive right to live in�the property for the rest of their lives. Therefore, the elder client can live in their home�without worrying about the remainder owners (usually the children) kicking them out.�This can also be accomplished with a Medicaid trust.
• The life estate holder has the right to all the rents from the property if it is rented out�during his/her life, similar to a Medicaid trust.
• The property avoids probate after the death of the client since it passes by operation of�law, similar to a Medicaid trust.
• The life tenant retains their real property tax breaks including STAR, Enhanced STAR,�SCRIE, SCHE, etc. which can also be accomplished with a Medicaid trust.
• Under current Medicaid mandatory estate recovery laws, the home will not be available�to Medicaid under an estate recovery action since the home avoids probate (see above).
• The property receives a step-up in tax basis upon the death of the owner which saves the�remainder beneficiaries capital gains tax if the property appreciated after it was�purchased. This result is the same under a properly drafted Medicaid trust.
• The transfer of the property with a retained life estate triggers Medicaid�s 5 year look-back period for nursing home care which means the earlier you transfer the home, the�sooner you would be eligible for Medicaid nursing home care coverage. The same applies�to transfer to a trust.
• Deeding the home to a loved one with a retained life estate is generally cheaper and�simpler than deeding the home to an irrevocable Medicaid trust with a retained life estate.

Given all the above mentioned advantages in deeding the home to a loved one while retaining a�left estate (as opposed to deeding the home to an irrevocable Medicaid trust while retaining a life�estate), one may wonder why attorneys still recommend the use of irrevocable Medicaid trusts.

The below mentioned disadvantages will highlight a few of the reasons attorneys still advise�elderly clients to deed their home to a irrevocable Medicaid trust while retaining a life estate (as�opposed to deeding the home to a loved one while retaining a left estate).
Disadvantages of Deeding Your Home to a Loved While Retaining a Life Estate:

• When you transfer property with a retained life estate to someone else, you cannot sell�the property without the remainder owners� consent.
• You also lose the right to change who the eventual owners will be; once the transfer�occurs, you can�t take it back without consent. This contrasts with a trust which allows�you to retain a limited power of appointment and change who the eventual beneficiaries�will be at any time.
• The property will become an asset of the remainder beneficiaries immediately upon the�transfer and will also be available to the creditors and may prevent them from obtaining�means tested governmental benefits such as Medicaid and SSI.
• The sale of the home while you are in a nursing home will result in the life estate portion�of that transfer (calculated using IRS tables) becoming an available resource.
• If the home is sold, you would not qualify for the full $250,000 exclusion of capital gain�tax ($500,000 if you are married filing jointly). Rather, you would be entitled to a partial�qualification relative to the value of the life estate.

Conclusion

As mentioned in previous article, with careful Medicaid planning, you may be able to preserve�some or all of your estate assets for your children or other heirs while meeting the Medicaid asset�limits.

Speaking with an experienced trusts and estates/elder attorney will be useful to you because the�attorney will advise you on the options available to you which will allow you to use Medicaid to�cover the cost of medical care without depleting your assets.

May we all merit living long, healthy and happy lives – amen.

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The attorneys in the Trusts & Estates Practice Group at Yedid & Zeitoune have a combined 20�years of legal experience and are ready to assist you with all your estate planning needs.

Isaac Yedid, Esq. & Raymond Zeitoune, Esq.

Yedid & Zeitoune, PLLC

1172 Coney Island Avenue Brooklyn, New York 11230

Phone: (347) 461-9800 Fax: (718) 421-1695 Email:�[email protected]

NYC Office – By Appointment Only:

152 Madison Avenue, Suite 1105 New York, New York 10016

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