There are many different ways to facilitate asset transfers, and the various methods serve certain purposes. We endeavor to provide explanations here to help you understand your options, and to this end, we will look at the life estate in this post.
But first, we will provide some background information that you need to fully grasp why life estates are utilized.
If you create a will to express your final wishes with regard to the way that your assets will be distributed, it would be admitted to probate. You would name an executor in the document to act as the administrator, and if you fail to do this, the court would appoint a personal representative.
No inheritances can be distributed while the estate is being probated by the court, and depending on the complexity of the case in question, it will usually take between eight and 18 months. This is certainly less than ideal if you are going to be receiving a bequest.
You conduct your financial affairs privately for a reason, but privacy is surrendered if you use a will as your estate plan centerpiece. Anyone that has an interest can access the records, so they can uncover all the details.
Probate expenses include court costs, the executor’s payment, possible legal and accounting fees, appraisals, liquidations, and other miscellaneous expenses. A study found that somewhere between three and seven percent of an estate is typically consumed during probate.
Medicaid Estate Recovery
The Medicaid program may seem irrelevant if you will qualify for Medicare and retire with some resources. This makes sense on the surface, but there is a very good reason why a lot of seniors seek Medicaid eligibility at some point.
About 35 percent of elders will require nursing home care, and you can expect to pay over $100,000 for a year in a quality nursing home in the Burlington, Vermont area. Medicare does not pay for the custodial care that you would receive in a nursing facility.
Medicaid does in fact cover long-term care, and this is why it should be on your radar. You can qualify as a homeowner, but if you do this, it will be vulnerable during the Medicaid estate recovery phase after your passing.
The program is required to seek reimbursement from the estates of deceased beneficiaries, so they could potentially place a lien on the home if it is in your direct possession at the time of your death.
Now that we have looked at the background information, we can get to the point. If you own a home, you can establish a life estate. In so doing, you would name a party that would share an ownership interest in the home. This person is called the “remainderman.”
You would have the legal right to possess the property for the rest of your life, so nothing would change. After your death, the remainderman would become the owner of the property.
The transfer to the remainderman would not be subject to probate, so the pitfalls that we have examined would not enter the picture. Plus, the home would not be in your possession at the time of your passing, so it would be protected during the Medicaid estate recovery.
Schedule a Consultation!
As you can see, there are many things to take into consideration when you are planning your estate. When you work with our firm to develop your plan, we will learn about your situation and your objectives and make recommendations based on the circumstances.
At the end of the process, you will go forward with a tailor-made plan that ideally suits your needs. If you are ready to get started, you can schedule a consultation at our Essex Junction, VT estate planning office if you call us at 802-879-7133.
We also have contact form on this site you can use to send us a message, and if you reach out electronically, you will receive a prompt response.