Planning for Life

By Harry S. Margolis

We were recently contacted by a new client who had apparently forgotten that about 10 years earlier, she executed a life estate deed transferring the remainder interest in her house to two of her daughters. Unfortunately, one of them has since passed away and she is estranged from the other.

She now wants to sell the property, but can't without the cooperation of the estranged daughter and of the estate of the deceased daughter. They are also both entitled to a share of the sale proceeds. She contacted us to see what she could do about the situation.

By Harry S. Margolis

Here's a note I recently received from one of the other attorneys in our office:

Was just on the phone with a client who worked with you in 1989. He came back in when his Dad died in 2005 and again now that that his Mom has died at age 102. His Mom had been in a nursing home covered by MassHealth. The house was protected with a life estate deed and $200,000 in savings was protected in an irrevocable trust. Nothing is going through probate and everything will receive a step-up in basis. Thought you would like to know you did a great job in 1989 and despite all of the changes in the law, it still worked. (Also I was in 4^th grade then, just saying, the firm does have longevity.)

By Harry S. Margolis

Owners of real estate sometimes transfer such property to their children while retaining the right to live in the property for the rest of their lives. Such ownership interests are referred to as "life estates" and give the life estate owners the exclusive right to occupy and even rent out the property during their lives. The children, in this case, are referred to as "remaindermen" and they have a real interest in the property, just no right of possession until the life estate owner dies.

By Harry S. Margolis

Life estates have long been a prime long-term care planning device for protecting the home from MassHealth estate recovery because they're quite simple to create. MassHealth recently changed its rules in terms of how it measures life estates when they are created or when property held in a life estate is sold.

What is a Life Estate?

A life estate is a form of joint ownership of real estate where ownership interests are divided by time. The so-called "life tenant" has the right to occupy the property during his or her life and to collect any rental income earned from the property. The life tenant also has the obligation of maintaining the property.