Applying for Medicaid is tricky, and timing is important. In fact, Medicaid planning is best started years before you actually need to apply for benefits. How your property is owned, and when it was titled, makes a big difference. One way to plan ahead for Medicaid is by using a life estate deed.
What is a Life Estate Deed?
A deed is a legal document used to transfer property interests. Just as there are different types of real estate transfers, there are different types of deeds: general warranty deeds, statutory warranty deeds, quitclaim deeds, and life estate deeds.
A life estate deed is often used in estate planning. It’s also useful for Medicaid planning. Some of the benefits offered when using a life estate deed include:
- As life tenant, the property owner continues living at the property until death or incapacity.
- At the death of the life tenant, the property immediately passes to the other owners, known as remaindermen or remainder beneficiaries.
- Property passed by life estate deed is not included in probate estate. (However, it is still included in taxable estate.)
Medicaid Eligibility and Your Life Estate Deed
The Medicaid application process involves determining eligibility based, in part, on available income and resources. If an applicant owns property outright, it typically will be considered a resource. In some cases, people are denied Medicaid eligibility because their income or resources exceed the limits.
However, Alabama Medicaid guidelines do not consider property held under a life estate deed to be a resource – unless the property was transferred within the five year review period going back from the date of the application.
How might this play out? Well, if Maggie applies for Medicaid. She does not own her home outright, but has signed a life estate deed naming her children as the remainder beneficiaries. Her other resources put her well below the resource limit. Medicaid ignores the property that’s held under the life estate deed and approves her application. Several years later, Maggie passes away and the remainder beneficiaries take possession of the property. There are tax consequences of using a life estate deed that need to be considered before proceeding.
Learn More About Life Estate Deeds and Medicaid.
Even if you haven’t started Medicaid planning before you need to apply, you can still benefit from the advice you’ll receive from the attorneys at Adams & Miller, P.C.
Don’t let Medicaid eligibility issues give you an unpleasant surprise. Know where you stand now, and how to plan for the future. Talk to an Alabama attorney with experience and training to handle your concerns. Contact Miller Estate and Elder Law at 256-251-2137 to schedule an appointment. We help clients in Anniston, Talladega, Birmingham, Gadsden and surrounding communities.
