17.10 Life Estates

Example 1: Marion gave her home to her son John in December 2006. She was 83 at the time. The FMV of the house at the time of the transfer was $87,000. Marion retained a life estate. In January 2009, she applied for Family Care. Since the transfer of her home occurred in the look back period, the worker will have to determine a divestment penalty period. The divestment amount is the FMV of the house as of December 2006 minus the life estate value.

To determine the life estate value, multiply $87,000 by .38642 (the number from the Section 39.1 Life Estate and Remainder Interest table that corresponds to age 83).

The divested amount is $87,000 - $33,618.54 = $53,381.46. $53,381.46  divided by 6,362 = 8.39 months. Marion would have been ineligible from December 2006 through July 2007. She was determined eligible beginning January 1, 2009.

Example 2: In June 2009, John sold the home for the current FMV of $102,000, and Marion terminated the life estate. He took the proceeds from the home and bought another house. He did not pay Marion for the value of the life estate, so a divestment has occurred. The divestment amount is the life estate value at the time the life estate was terminated.

To determine the life estate value, multiply $102,000 (value of the house at the time the life estate was terminated) by .33764. (The number is from the table in Section 39.1 Life Estate and Remainder Interest that corresponds to Marion's age, 86, at the time the life estate was terminated.)

$102,000 X .33764 = $34,439.28

The divested amount is $34,439.28. The average daily nursing home cost of care as of June 2009 was $209.16. Marion's penalty period is 164 days. She is ineligible from June 2009 through November 12, 2009.

Since this is an open/ongoing case, you have to give timely notice to end her Institutional Medicaid. If the divestment has been reported timely, you would close her case using adverse action logic.

If the divestment were not reported timely you would have to calculate an overpayment for the months she would have been ineligible if the change would have been reported timely (see Section 22.2.2.2 Overpayment Amount).

Example 3: James sold his home to his son Robert on December 1, 2006. James was 75 years old and the home was worth $95,000. Robert paid James $50,000 for the home and James retained a life estate. The life estate value is $49,541.55 (95,000 X .52149).(See Section 39.1 Life Estate and Remainder Interest for this value.) Since James received both $50,000 from Robert and retained a life estate worth $49,541.55, the total value he received is more than the FMV of the home. Because the value he received is greater than the FMV of the home, there is not divestment.

In February 2007, James moved to a CBRFcommunity-based residential facility. A place in which five or more unrelated adults live and where they receive care, treatment, or services, but not nursing care on any permanent basis, in addition to board and room and the home was rented out and James continued to retain the life estate. The home is not an available asset to James even though he is no longer living in the home. Because he holds a life estate on the home, James is entitled to any income produced by the property. The net rent from the home is countable income for James (see Section 15.6.4 Self-Employed Income Sources).

Example 4: In June 2006, Marie and George transferred ownership of their home to their three sons and retained a life estate on the property. The FMV of the home at the time of the transfer was $140,000. At the time George was 82 and Marie was 68. In February 2007, George applied for Family Care. Since the transfer occurred in the look back period, the worker must determine the amount of the divestment and the penalty period. To calculate the total divestment the worker must first determine the life estate values.

$140,000 divided by 2 = $70,000

George's age at the time of the transfer was 82. Multiply 70,000 x .40295 (See Section 39.1 Life Estate and Remainder Interest for this value.)= 28,206.50

Marie's age at the time of transfer was 68. Multiply 70,000 X .63610 = 44,527.00

The total life estate value for both Marie and George is $72,733.50.

The divested amount is the FMV minus the life estate value ($140,000 - $72,733.50 = $67,266.50).

To calculate the penalty period, divide the divested amount by the average nursing home cost of care at the time of application ($67,266.50 divided by $5584). George has a 12 month penalty period so will be ineligible from June 2006 through May 2007.

Example 5: Ralph purchases a life estate interest in his brother’s home on January 5, 2009, and moves into that home on the same date. He goes to Florida on January 20, 2009, and returns to the home on February 10, 2009. January and February count as whole months of residence because Ralph’s absence was less than 30 consecutive days.

Example 6: Vicki purchases a life estate interest in her sister’s home on January 20, 2009, and moves into that home on the same date. On March 3, 2009, Vicki goes to Bermuda for a family vacation and returns on April 15, 2009. Since Vicki was absent from the home for 30 or more consecutive days, the consecutive month of residency string is broken. Vicki’s 12-month residency clock is reset with April 2009 being her "new” first month of residency.

Example 7: Jim purchases a life estate interest in his cousin’s home on January 20, 2009, and moves into that home on the same date. Jim continues to reside in the home until April 10, 2009, at which time he is hospitalized as a result of an auto accident. Jim remains in the hospital until August 5, 2009, when he is discharged and returns home. Jim continues to reside in the home from August 5, 2009, until December 24, 2010.

Jim’s residency in the home for the months of January, February, March, and part of April count as four consecutive months of residency. The months of May, June, and July are not included in the consecutive month count because he is absent from the home for those full calendar months. However, the absence from the home for those months does not cause the 12-month clock to be restarted because Jim’s absence was the result of his hospitalization. When Jim returns to the home on August 5, 2009, August counts as the fifth month of continuous residency. Jim will meet the 12 months of continuous residency requirement in March of 2010.

Example 8: Joyce, age 75, has $200,000 in her savings account. On February 3, 2009, she gives $200,000 to her son in exchange for a life estate interest in her son’s home. The FMV of the son’s home as of February 3, 2009, was $300,000. Joyce moved into her son’s home on March 5, 2009, and has resided there continuously for more than 12 consecutive months. On April 9, 2010, Joyce applies for a community waiver program, meets the functional screen and all other Medicaid eligibility requirements. Joyce also establishes that as of her application date for community waivers, she has resided in her son’s home for more than 12 consecutive months.

The divestment issue that now needs to be resolved is whether or not Joyce received FMV for the $200,000 that was used to purchase the life estate. Using the Life Estate and Remainder Interest Table in Section 39.1 Life Estate and Remainder Interest, it is determined that Joyce’s life estate interest was worth $156,447 at the time of the purchase. Since Joyce paid $200,000 for a life estate that was worth $156,447, the divested amount is $43,553. Joyce is ineligible for community waiver beginning on the date of her community waiver application