Attorney Thomas B. Burton answers a question about who is entitled to the money from the sale of a home when the parents retained a life estate in the home in Wisconsin.
Transcript of Video: Who Gets the Money When We Sell the Home and My Parents Retain a Life Estate?
Today's question comes from Cuba City
Wisconsin and the reader asks the following
when a warranty deed indicates this
conveyance reserves a life estate for
the grantors how does sale of property
work and the reader says my parents 2006
estate planning included deeding their
home to us six children via a warranty
deed with the idea that they would
continue to live there
my dad was moved to nursing home in
January of this year
mom has since passed away us children
recently sold the property it was our
understanding that the proceeds would
only go to us six children due to the
estate planning 25% of the proceeds were
made payable to our dad this defeats the
purpose of the estate planning as now
it will go to the nursing home was this
transaction completed properly so this
is a complicated area you've got a lot
of things going on here with Medicaid
planning it looks like but in general if
you transfer a life estate what I should
say is if you make out a deed and you
reserve a life estate to yourself that
life estate owner still owns an interest
in the property so when you went to sell
it but your dad was still alive they're
going to calculate his ownership interest
in the property according to his age and
life expectancy and they're going to use
tables available from the Social
Security Administration because they
average out how long people live based
on their date of birth and current age
and then they it sounds like assigned
him 25% interest in the property when
you sold his life estate and if he's
currently receiving Medicaid and that
cash went into his name you're right
that it's probably going to count
against him for receiving Medicaid now
there's some ways you can put that into
a special needs trust but you need to do
it all in the same month you
would receive the property so if this
already happened it may be too late but
for my other listeners watching keep
that in mind but in general before
August 1, 2014 using life estates was
a more common method of Medicaid
planning now I generally don't recommend
it because the state of Wisconsin has
now said they're going to recover
against life estates after August 1, 2014
so in your situation I think you would
have been better off with a trust
planning which possibly could have
allowed your dad to live there but the
trust would own the home and then if you
had to sell it the proceeds from the
sale would go into that trust as well
again there's a five-year Medicaid
look-back period for that kind of
planning but it appears in this
situation if he kept a life estate it's
correct that they would have to pay him
for his interest as the life estate
holder when you sell the property and in
this case it sounds like that worked out
to be 25% so great question and thank
you for asking.
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