Will Medicaid Require Beneficiary Under a Will to Receive Portion of Proceeds in Sale of Family Home?
Is a life estate vested and effective if it’s created in a will which also requires the sale of the property (presumably terminating the life estate) and division of proceeds among all children if the child granted the life estate is no longer living in the property? In our case, the child who granted the life estate moved to a nursing home before our mother passed away and does not plan to return to the property. In addition to receiving a portion of the sale proceeds, would that child be entitled to additional compensation under the Medicaid actuarial rules if the child should apply for long-term care Medicaid coverage?
While I don’t have the will in front of me, it sounds like the problem is the use of the term “life estate.” Generally “life estate” refers to an interest in real estate conveyed through a deed and it constitutes an ownership interest in the property. Instead, what you’re describing is really more of a life “interest” since the child does not have ownership in the property. But even there, the use of “life” is probably in error. My guess is that a judge, if it came to that, would read both sentences together to try to interpret your mother’s intent and conclude that the child’s interest ended upon his moving out of the property. In that case, he should not be compensated for it when the property is sold, since he would no longer have any more interest in the property than the other beneficiaries.
In addition, the sale should not be considered a transfer for purposes of Medicaid eligibility. If any transfer occurred it happened when the child moved to the nursing home, but it would be hard for the state Medicaid agency to argue that he moved there for purposes of qualifying for Medicaid benefits, which is a prerequisite for its imposing a transfer penalty.