How do we sell mom's house if she has a life interest in it - won't that interfere with her Medicaid?

Kathsteve asked...

My siblings and I own a house in Kentucky that our mother has a life interest in. We had to put her in a nursing home because she has Alzheimer's and we could no longer care for her at home. The house has been empty for a year and starting to fall apart. We have been paying all the bills and decided it was time to sell. We were told we had to give our mother her life interest share if we sell. Won't this mess up her Medicaid and can we reimburse ourselves for what we have paid out?

Expert Answer

Steve Weisman hosts the nationally syndicated radio show A Touch of Grey, heard on more than 50 stations, including WABC in New York City and KRLA in Los Angeles. He is a practicing lawyer specializing in estate planning and is admitted to practice before the United States Supreme Court. He's a public speaker and commentator who has appeared on many radio and television shows throughout the country, and he's the legal editor of Talkers magazine, the preeminent trade publication of talk radio. His latest book is The Truth About Avoiding Scams.

As the holder of a life estate interest in the home, your mother must receive a share of the sale proceeds proportionate to her life estate interest. This amount is computed by the use of standard charts used by both Medicaid and the IRS. If your mother receives her share as a lump sum, she will be disqualified from Medicaid until she has spent this money down, at which time she can reapply again for Medicaid benefits. However, it may be possible for her to receive her share of the proceeds by way of periodic payments or an annuity which could permit her to remain on Medicaid although the amounts she would be receiving would affect her Patient Pay Amount. The laws regarding this differ somewhat from state to state so I suggest that you contact an Elder Law lawyer in your state to assist you with this matter. As for being reimbursed for work that has been performed on the home, it is very much dependent on what the agreement was when the work was done. If it was, in essence, a loan by which you were to be paid back when the home was sold, you may be able to have these amounts deducted from the sales proceeds. Again, this is complicated and you should obtain the services of a trained elder law attorney. You can find one by going to the website of the National Academy of Elder Law Attorneys.