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Who Gets the Money When We Sell the Home and My Parents Retain a Life Estate?

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.

© 2019 Law Office of Thomas B. Burton. All Rights Reserved.

Transcript and captions provided for ease of access for the hearing impaired.

For questions about this topic, or to suggest a topic for a future blog post, please contact my office.

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