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My father quit claimed his home to me in 2001 but maintained

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My father "quit claimed" his home to me in 2001 but maintained a life estate in the property. He moved into an assisted living facility in 2002, and into a nursing home in 2008. He has been a Medicaid recipient since entering the nursing home. I am about to sell his home, and because of his life estate in the property, the title company must issue a 1099 tax form showing that he will receive $43,000 of the proceeds of the sale. This will undoubtedly play havoc with his Medicaid benefits. Can Medicaid take this $43,000? If so, is there any way to prevent that from happening? Is it possible for my father to "quit claim" his life estate rights to me, so that the life estate is no longer attached to the deed? Help!
Submitted: 3 years ago.
Category: Real Estate Law
Expert:  Roger replied 3 years ago.

Hi - my name is XXXXX XXXXX I'm a Real Estate litigation attorney here to assist you.

 

A life estate is not an ownership interest in the property. If your father deeded you the property, you are the owner - not your father.

 

Thus, your father should not receive any money from the sale of the property, but he would have to sign off on the sale because of his life estate, which is essentially an easement on the property.

 

I think you need to ask the title company why it believes your father is entitled to any proceeds from the sale of the property you own.

Customer: replied 3 years ago.
The Quit Claim deed to the property states" "Grantor reserves to himself a life estate in the above described property (the home and land it is on), without liability for waste and with full right to use, modify, remove or replace all improvements thereon, and to make such changes to the land as he sees fit."

The title company used a sate of Wisconsin Medicaid Eligibility Handbook chart to determine what percentage of the proceeds my father would receive--and at 92, his percentage is .2577 of the proceeds.
Expert:  Roger replied 3 years ago.

Ok. Apparently, they're giving him a value for his life estate. This is unusual, but I understand what they're doing.

 

In this case, the best thing your dad can do is issue you another quitclaim deed for his life estate interest in the property. If he transfers this interest to you, then you'll own the property without this encumbrance (life estate) and you would be entitled to collect all of the money and not pay your dad anything.

 

If you can't or don't do this, your dad will have to report the income and it would interrupt his Medicaid benefits; also Medicaid undoubtedly has a lien against him and would likely make a claim for this entire amount and use it to repay expenses for his care.

Customer: replied 3 years ago.
My father is now incapcitated. I was granted Power of Attorney for him in 2002. Will it be considered a conflict of interest or a problem if I initiate the Quit Claim (in his name/behalf) to transfer his life estate interest to me? This is complicated!
Expert:  Roger replied 3 years ago.
If you and your brother are the only heirs of your father, and both of
you agree to this, there should be no conflict because the two of you would be the only ones who could complain.

The only other issue is that there's a 5 year lookback for Medicaid, and any transfer is going to be subject to scrutiny by Medicaid. This means that Medicaid could make a claim for this money, but because life estates have practically no value, this usually doesn't happen.
Roger, Lawyer
Category: Real Estate Law
Satisfied Customers: 27207
Experience: BV Rated by Martindale-Hubbell; SuperLawyer rating by Thompson-Reuters
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