26 Feb How does assisted living facility look at a life estate?

Q. How does one assess the value of the life estate from their home for the purpose of going into an assisted living facility when two of the three children refuse to sell the house?

— Confused

A. Your question brings up lots of issues that people should consider before entering into a life estate, which is an ownership interest in property that ends at your death.

First, we hope everyone speaks to an estate planning attorney before transferring property into the names of your children.

Upon making the transfer, you have made a gift to your children and you cannot merely take it back, said Catherine Romania, an estate planning attorney with Witman Stadtmauer in Florham Park.

“This gift may have both tax and Medicaid qualification consequences,” she said. “As in this case, it can also affect your personal financial situation if you have not yet qualified for Medicaid.”

With a life estate, upon your death, ownership of the property will pass to the remainderman; in this case your three children, Romania said.

During your life, a life estate allows you the sole use and possession of the property subject to you maintaining the property during your lifetime, she said.

You can live at the property or rent it out and collect the rent money, and the rent money can be used to pay for the expenses to maintain the property with any additional sums going to pay for your expenses at the assisted living facility, Romania said.

Your life estate has a value. As you grow older, the value diminishes, she said.

“Although you could sell solely your interest in your life estate without selling the property itself, it is unlikely you will find someone interested in buying the right to live on the property until you pass,” she said. “If your children did agree to sell the property, you would only be paid the value of your life estate, and not the value of the entire property.”

Given the complications of your situation — and the important consequences — you should speak to an estate planning attorney who can review all the specifics.

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This story was originally published in February 2024.

NJMoneyHelp.com presents certain general financial planning principles and advice, but should never be viewed as a substitute for obtaining advice from a personal professional advisor who understands your unique individual circumstances.