210 R.I. Code R. 210-RICR-50-00-6.9

Current through December 3, 2024

Section 210-RICR-50-00-6.9 - Asset Transfers Involving Life Estates

A. Life estate means a legal arrangement entitling the owner of the life estate (sometimes referred to as the "life tenant") to possess, rent, and otherwise profit from real or personal property during their lifetime. The amount of a life estate that is countable depends on when it was established, whether the applicant(s) have the legal right to sell the home, and the portion of the proceeds of the sale, if allowed, that are available.

B. For all Medicaid LTSS applications and renewals after January 1, 2006, the establishment of a life estate for a home is treated as a transfer of assets.

1. Disqualifying transfer - A life estate may be a disqualifying transfer in the following instances:

a. Applicant/beneficiary owns the property - When an applicant or beneficiary has an ownership interest in a home and establishes the life estate on his or her own behalf, the remainder interest is a disqualifying transfer. The remainder interest is the equity value of the property minus the value of the life estate as determined in accordance with § 6.3(B)(3) of this Part.

b. Applicant/beneficiary purchases property - When an applicant/beneficiary purchases a life estate in the home of another person, and the payment made exceeds the FMV of the life estate, the difference between the amount paid and the FMV is treated as a disqualifying transfer. This transfer is disqualifying even if the applicant/beneficiary lives in the home of the life estate for one (1) year or more.

c. Applicant/beneficiary gifts the property - In instances in which the applicant/beneficiary makes a gift or transfer of a life estate interest, the value of the life estate, as calculated under § 6.3(B)(3) of this Part, is considered a disqualifying transfer of assets.

2. Allowed transfer - When an applicant or beneficiary establishes a life estate for fair market value, the purchase price is an allowed transfer if he or she resides in the home for at least one (1) year after the life estate is established. If the home held in the life estate is not excluded in accordance with the provisions set forth in §§ 6.3(B)(1) and (2) of this Part, the value of the life estate is counted as a resource in determining Medicaid LTSS eligibility.

C. A home held in a life estate may be excluded as a resource for Medicaid LTSS eligibility determination, providing the provisions of § 6.3(B)(3) of this Part have been met.

6.9.1Life Estate with Enhanced Powers

A. A deed containing a life estate with enhanced powers is also known as an "enhanced life estate deed" or a "Ladybird deed." An enhanced life estate deed permits a person to reserve the rights to sell, convey, mortgage, revoke, amend, and otherwise dispose of the property while alive. Upon the life estate holder's death, the life estate passes to a remainderman, without the need for probate. The deed specifies who will become the owner of the property upon death.

B. On or after July 1, 2014, an applicant or beneficiary who holds a life estate with enhanced powers that serves as a primary residence is ineligible for Medicaid LTSS, unless or until the applicant/beneficiary:

1. Conveyance of the remainder interest - Exercises the retained power to convey all outstanding remainder interest to him or herself.

2. Basis of the transfer - Uses a warranty deed or quitclaim deed created, executed, and recorded to transfer the remainder interest.

3. Ownership - Holds the real estate, free and simple with no encumbrances.

C. Upon assuming ownership of the remainder interest, a determination of whether the home exclusion applies is made in accordance with § 6.3 of this Part if the applicant or beneficiary is otherwise eligible.

D. An applicant or beneficiary who has a reserved a life estate with enhanced powers with retained rights to revoke, amend, or re-designate the remainderman by a deed created, executed, and recorded prior to July 1, 2014 is not denied Medicaid eligibility based on that deed, regardless of whether the remainderman designated is a person or persons, a trust, or other entity.

210 R.I. Code R. 210-RICR-50-00-6.9

Adopted effective 1/20/2019
Amended effective 7/21/2021