HW "Skip" Weldon wrote:

- quote -

My general understanding is that the "life estate" would be
valued and included in the assets that must be spent (or
pledged to Medicaid) prior to Medicaid coverage. However,
since the value of the life estate would be less than the
value of the entire property, an "advantage" is gained. I
assume that normal "look back" periods would still apply to
the initial transfer.

- quote -

My guess is that under the right circumstances, the answer
could be "any and all."

MTW

<< -------------------------------------------------> << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org > << ------------------------------------------------->

"Stuart Bronstein" <spamtrap[at]lexregia.com> wrote:
- quote -

Got me nervous there - Thanks for the clarification.

Marty

<< -------------------------------------------------> << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org > << ------------------------------------------------->

martin.burger[at]pobox.com says...
- quote -

It makes sense for the lawyer who set up the life estate.
(Or for the author of the book you bought to help you do
it.)

Gary

--
You can probably X figure out X which letters to X delete to
derive my email address X.

<< -------------------------------------------------> << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org > << ------------------------------------------------->

Martin Burger <martin.burger[at]pobox.com> wrote:
- quote -

My comments are based on the property not being exchanged. I
do not know what affect exchanging the properties would
have.

Since your mother retained an interest in the property (life
estate) upon her death the full value of the asset will be
part of her estate. As such you and your brother would get a
stepped up basis to FMV at date of death.

R.A. Moore, EA

<< -------------------------------------------------> << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org > << ------------------------------------------------->

Stuart Bronstein <spamtrap[at]lexregia.com> wrote:

- quote -

Thanks to Mr. Bronstein for that clear reply. Now, since
the asset is still in the original owner's estate for tax
purposes, the next two questions are:

1. Does the transfer with a retained life estate remove the
asset for purposes of the Medicaid tests? (I realize that
States vary somewhat in their rules, but this is such a
major matter that I suspect they all treat this the same.)

2. Whose creditors (the retained life interest or the
remainderman) have the right to attach the asset if
necessary?

Before anyone suggests to the contrary, while these are
legal matters, they are also financial matters.

-HW "Skip" Weldon
Columbia, SC

<< -------------------------------------------------> << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org > << ------------------------------------------------->

Martin Burger wrote:
- quote -

As far as the basis, section 2036 of tax code says, in part,

"The value of the gross estate shall include the value of
all property to the extent of any interest therein of which
the decedent has at any time made a transfer ... under which
he has retained for his life or for any period not
ascertainable without reference to his death or for any
period which does not in fact end before his death— (1) the
possession or enjoyment of, or the right to the income from,
the property,..."

Ok, I got that backwards. If your mother owned the whole
thing, then retained a life estate while transferring to you
the remainder interest, the entire value of the property is
counted as in her estate for estate tax purposes. As such I
imagine that the entire value should get a stepped up basis
on her death.

Sorry about the confusion.

Stu

<< -------------------------------------------------> << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org > << ------------------------------------------------->

"Stuart Bronstein" <spamtrap[at]lexregia.com> wrote:
- quote -

I thought that one of the whole purpose of the Life Estate
is to pass an asset to heirs with the stepped-up-basis. From
your comments there is no consequense to her holding the
Life Estate i.e. no Medicaid protection and no tax
protection! Makes no sense?

Marty

<< -------------------------------------------------> << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org > << ------------------------------------------------->

Martin Burger wrote:

- quote -

From a tax standpoint this is not a good thing to do.
Technically your mother should have filed a gift tax return
in 1995. And as a result your basis in the property after
your mother dies will be much lower (that is to say your
income tax when it is sold will be higher) than need be.

- quote -

Sure. All three of you will have to sign the deed to
transfer the current property. Have the title company draft
the new deed to specify your mother as life tenant, and you
and your brother as owners of the remainder.

- quote -

If you are talking about the period of time that Medicaid
looks back to recapture assets for qualification purposes, I
don't know but would guess the answer is yes. On the other
hand your mother's portion of the property is only exempt if
she lives there.

- quote -

Based on what you've written the answer is no.

Stu

<< -------------------------------------------------> << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org > << ------------------------------------------------->

My mother deeded her three family house over to my brother
and myself in 1995 while reserving for her a Life Estate.
She has not lived in the house for the last 10 years and has
managed the house for the past 20 years. She is 82 and now
doesn't want to manage it anymore. Since the house is quite
a distance from both me and my brother we are considering
exchenging the house via "Like Kind Exchange" (1031). We
would like to keep the same arangement i.e. me and my
brother as tenants-in-common and my mother retaining a Life
Estate. Can this be done? Would it still have the asset
protection from Medicaid without the 3 year lookback? Upon
the death of our mother would we obtain the house with the
stepped up basis?

Many thanks,
Marty

<< -------------------------------------------------> << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org > << ------------------------------------------------->