• Skip to main content
  • Skip to primary sidebar
  • Skip to footer
  • (843) 815-8580
  • hunter@montgomeryestateplanning.com
  • 10 Pinckney Colony Road, Suite #402 Bluffton, SC 29910

Montgomery Law Firm, LLC

Your Trusted Estate Attorney in Bluffton, SC

  • Home
  • Our Firm
    • About Our Firm
    • Attorney Profile
  • Services
    • Asset Protection & Business Planning
    • Elder Law & Medicaid Services
    • Estate & Gift Tax Figures
    • Estate Planning Services
    • Family-Owned Businesses & Farms
    • Financial Planning Assistance
    • Incapacity Planning
    • IRA & Retirement Planning
    • Legacy Planning
    • Pet Planning
    • Special Needs Planning
    • Trust Administration & Probate
  • Elder Law
    • Are You A Caregiver?
    • Coping With Alzheimer’s
    • Emergency Medicaid & Nursing Home Planning
    • Hospice Care
    • Medicaid Planning
  • Resources
    • Blog
    • DocuBank
    • Elder Law Reports
    • Estate Planning Resources
      • Definitions
      • Estate Planning & Related Forms
      • Estate Planning Checkup
      • Estate Planning Reports
      • Incapacity Planning Definitions
      • Is Your Estate Plan Outdated?
      • Top 10 Estate & Legacy Planning Techniques
    • Frequently Asked Questions
      • Estate Planning
      • Incapacity Planning
      • Irrevocable Trust
      • Legacy Wealth Planning
      • Trust Administration & Probate
    • Pre-Consultation Form
    • Special Needs Resources
    • Trust Administration & Probate Resources
      • Bereavement Resources
      • How to Know if You Need Extra Help With Your Grieving
      • Loss of a Loved One
      • The Mourner’s Bill of Rights
      • Things You Need To Do When a Loved One Passes Away With a Trust
      • Things You Need To Do When a Loved One Passes Away With a Will
      • Trust Administration & Probate Definitions
  • Webinars
  • Seminars
  • Reviews
    • Review Us
    • Our Reviews
  • Contact Us
  • Search
Home / Estate Planning / Is a Life Estate a Good Way to Transfer Home Ownership?

Is a Life Estate a Good Way to Transfer Home Ownership?

August 8, 2022 by Hunter Montgomery

life estate A life estate can potentially be used to facilitate the transfer of your home and other real property. There are some benefits, but there is also a major drawback, and we will provide the details in this post.

Probate Avoidance

If you establish a life estate, you would be called the “life tenant,” and the person that will inherit the home after your death would be referred to as the “remainderman.” You would continue to live in the home as usual for the rest of your life.

All of the costs associated with the home would fall to you, and the remainderman would have no responsibilities on that level. During this interim, the remainderman would have no legal right to access or use the property.

After your death, the remainderman would inherit the property, and this transfer would not be subject to probate. This is a legal procedure that will enter the picture if you were to transfer the home through the terms of a simple will.

Probate serves a purpose, because final debts are paid, and the court examines the will to determine its validity. However, it is time consuming, it is a public proceeding so there is a loss of privacy, and probate expenses reduce the value of the estate.

Medicaid Planning

The majority of senior citizens will need some type of living assistance, and over 30 percent of elders will require nursing home care. These facilities are very expensive, and Medicare does not pay for the custodial care that they provide.

Medicaid will cover long-term care, and in fact, most people that are in nursing homes are enrolled in the program. You cannot qualify if you have significant assets in your own name, but your home is not a countable asset.

On the surface, it can seem as though you could simply qualify as a homeowner if you need long-term care without any problem. In fact, there is a process called Medicaid estate recovery. The program could place a lien on your home after you pass away.

You can give gifts to develop a financial profile that will lead to Medicaid eligibility. However, there is a five-year Medicaid look-back period that applies to divestitures that are made prior to the application date.

If you establish a life estate at least five years before you apply for Medicaid, the property would be transferred to the remainderman after your death, and it would be protected during the estate recovery phase.

Selling the Home

There is one major factor to weigh heavily when you are considering the utilization of a life estate. Let’s say that you get remarried after you establish the life estate and the trajectory of your life changes.

You and your spouse decide that you want to sell the property. This would not be possible without the cooperation of the remainderman. Plus, you would be selling your interest in the home, which is not a full ownership share.

After you create a life estate, your interest in the property is the right to live in it for the rest of your life. This has limited value, and it would be taken into account if the property is sold. The same arrangement would apply if you wanted to mortgage the home.

Other Possibilities

If you want to retain complete control of your property throughout your life and arrange for an eventual probate-free transfer, you could establish a living trust. This would be a revocable trust, and you would be able to act as the trustee while you are living.

After your passing, the successor trustee would distribute the assets to the beneficiaries in accordance with your wishes, and the probate court would not be involved.

This would not be an effective Medicaid planning solution, because the property in the trust would be countable for Medicaid eligibility purposes. As an alternative, you could establish and fund an irrevocable Medicaid trust.

You could accept distributions of the trust’s earnings, and you could live in the home as usual. As long as you honor the five-year look back period, the home would not count if you applied for Medicaid, and it would be out of reach when Medicaid is seeking recovery from your estate.

Schedule a Consultation Today!

Today is the day for action if you are going through life without an estate plan. You can schedule a consultation at our Bluffton, SC estate planning office if you call us at 843-815-8580, and you can use our contact form to send us a message.

 

 

  • Author
  • Recent Posts
Hunter Montgomery
Hunter Montgomery
Hunter Montgomery is the owner/managing attorney of the Montgomery Law Firm, LLC.He has been practicing estate planning law fsince 2002. Hunter is a member of the American Academy of Estate Planning Attorneys.

Hunter is a member of the South Carolina Bar Association, the Beaufort County Bar Association, and has served on charitable and advisory boards in the Bluffton/Hilton Head area.

Hunter graduated from Hilton Head High School. He then earned his Bachelor of Science Degree in Economics from Clemson University, in Clemson, South Carolina.

Hunter graduated Cum Laude from Regent University School of Law in Virginia Beach, Virginia, having earned a Juris Doctor Degree. He also wrote his doctorial thesis on Estate Planning Dynasty Trusts.

Hunter has called Beaufort County home for since 1984, where he lives with his wife and two children.In his spare time he dabbles in automobiles, reading history, hunting and fishing.
Hunter Montgomery
Latest posts by Hunter Montgomery (see all)
  • Sandwich Generation Juggles Responsibilities - February 27, 2023
  • How Can You Minimize Estate Tax Liability? - February 20, 2023
  • Elder Law Attorneys: Who Are They and What Do They Do? - February 15, 2023

About Hunter Montgomery

Hunter Montgomery is the owner/managing attorney of the Montgomery Law Firm, LLC. He has been practicing estate planning law fsince 2002. Hunter is a member of the American Academy of Estate Planning Attorneys.

Hunter is a member of the South Carolina Bar Association, the Beaufort County Bar Association, and has served on charitable and advisory boards in the Bluffton/Hilton Head area.

Hunter graduated from Hilton Head High School. He then earned his Bachelor of Science Degree in Economics from Clemson University, in Clemson, South Carolina.

Hunter graduated Cum Laude from Regent University School of Law in Virginia Beach, Virginia, having earned a Juris Doctor Degree. He also wrote his doctorial thesis on Estate Planning Dynasty Trusts.

Hunter has called Beaufort County home for since 1984, where he lives with his wife and two children. In his spare time he dabbles in automobiles, reading history, hunting and fishing.

Blog Subscription

Sign up for our blog to receive the latest estate planning news and updates.

Map

Map

Business Hours

Monday9:00 AM - 5:00 PM
Tuesday9:00 AM - 5:00 PM
Wednesday9:00 AM - 5:00 PM
Thursday9:00 AM - 5:00 PM
Friday9:00 AM - 5:00 PM
Montgomery Law Firm, LLC

Montgomery Law Firm, LLC. helps you define what's important.

Montgomery Law Firm, LLC

Contact Info

10 Pinckney Colony Road
Suite #402
Bluffton, SC 29910

Toll Free: (843) 815-8580
Mon-Fri: 9:00am – 5:00pm

Quick Links

  • Our Firm
  • Reviews
  • Privacy Policy
  • Disclaimer
  • Irrevocable Trust FAQs

Webinars Sign up

© 2023 American Academy of Estate Planning Attorneys, Inc All rights reserved.