Grandmother's home in life estate, grandson is on warranty deed. Now needs to sell house for Medicaid?

Macy, I’m going to approach this from an entirely different angle…. Why the need to sell your moms house?

By & large LTC Medicaid allows the elder who owns a home to continue to keep the home as an exempt asset for their lifetime. Whether the home is still on their name or they moved it into a Life Estate or they did a Lady Bird Deed on it, whatever the case it doesn’t matter… it’s still her home with a homestead exemption & primary residence. If it’s a LE mom still is technically the owner / tenant so it’s still her home. Ditto for property put into a Lady Bird / Enhanced Benefit Deed. Medicaid will want some sort of annual “intent / right of return” statemEnt done. But mom can keep the home, it’s still her exempt asset,

The rub will be that Medicaid will require mom to have almost all her mo income go as a copay to the NH. Essentially mom has zero-none-nada of her $ to pay a penny on the house. So family / heirs will need to pay all property costs for undetermined period of time.
Is this the reason why y’all r looking to sell?
OR
it is a different problem with Medicaid…. Like mom did the LE just recently to her grandsons and Medicaid is considering it to be “gifting” so there’s a huge transfer penalty and it has to be sold but anything that’s a LE sale (before death) has the added complications of determination of % interest of your mom as the tenant owner and your sons each % as the remainderman? Imo figuring out the % is not ever a DIY, you need a tax attorney (LL.M) to do the determination and use this to submit to IRS and also Medicaid.
Or
mom actually sold it via a Warranty Deed (WD) within past 5 years, so its fully owned by the boys & it’s totally in transfer penalty zone?

They are very different problems to resolve ime.
So what’s the backstory on this drama?

FMV as Medicaid is involved is an issue as well. But determination of FMV is imo something you can have input in changing if there is a discrepancy between the tax assessor value and the actual value of the property.

Out of curiosity, y’all did a “gen skip” on the house. Normally parents gift to their kids not the grandkids. Gen skip tends to be suggested by financial planners or estate attys as a way to shift assets to someone (kids) who have no tax liability. To do a gen skip via a LE, isn’t the usual thing either. Did y’all have an FA or estate attorney who does wealth management behind this happening?

If your mom did an LE within a WD, as PolarBear wrote, it’s gonna be 8 types of Hades to get through imo. Did the atty you are working with now do the LE / WD combo?

From what OP wrote, I think grandma used Warranty Deed with a Life Estate clause to transfer ownership 10 years ago.

Here's a link to a good article written by a certified elder care attorney about Life Estate and how it protects assets from nursing home costs and Medicaid.

https://ssbllc.com/five-facts-to-know-about-life-estates/

Granda does NOT own 1/3 , her share is based on her life expectancy which decreases after each birthday.

Here are some excerpt from the article:

"Five-year ineligibility period: The transfer is a gift under the Medicaid (MassHealth) rules and the parents will be ineligible for Medicaid benefits to pay for their long-term nursing home care costs for five years following the transfer. Under the current Medicaid rules, once the five-year ineligibility period has passed, the parents would be eligible for Medicaid benefits to pay for the cost of their care, assuming they otherwise meet the eligibility criteria.

The property will be subject to a lien for the life estate Medicaid benefits. It is important to understand that if the parent receives Medicaid benefits, whether in a nursing home or in the community, the Commonwealth will place a lien against the parent’s property. However, if the parent owns a life estate in the property, the Medicaid rules prevent the state from forcing the parent/life estate holder to sell the property during the parent’s lifetime. Upon the death of a Medicaid beneficiary, the state can collect the amount it paid out on behalf of the person from his probate estate. A person’s probate estate consists of assets in his individual name. Because the retained life estate disappears upon the death of the parent, it is not a probate asset and therefore the state cannot enforce its lien against the property under current law. It is important to understand that if the property is sold during the parent’s lifetime, the lien will have to be satisfied from the parent’s share of the sale proceeds."

I would get a certified appraisal to back up any justification for not selling at FMV. Because there are lots of reasons this would work.

Verify that the attorney understands Medicaid and their rules.

Personally, I think using a certified elder law attorney (www.nelf.org is where you can find one) is the only way to go. They truly understand what needs to be done to protect the elder and ensure they can receive the care they need by avoiding missteps.

"Grandmother put 2 grandsons on warranty deed 10 years ago."

Important issue:  how is the deed actually titled?    This isn't criticism, but "putting" someone's name on something doesn't describe the ownership interests and/or rights.   The actual wording is critical.

Macy, can you get this information, i.e., the specific titling of the granting clause?

Posters notice Macy’s post that it is not a life estate she is dealing with.
Big difference between life estate and actual warranty deed where GM only owns 1/3.
Is the attorney a certified elder attorney with experience in Medicaid placement in GM state?
Is your question Whether Grands have to pay FMV or if they have to buy out GM now before she could qualify?
Normally, it is stressed that FMV must be paid BUT I can see where if GM only owns 1/3 interest the FMV might be hard to determine. The attorney may be right. Ask him to give you more information on how this will work out if you doubt the advise.

If GM stated that she wanted to declare her 1/3 ownership Of her residence as an exempt asset there is the problem that if either Grandson wanted to sell their interest in the home, the profit to GM at that time could jeopardize her Medicaid coverage. She would have to spend down the profit on herself in a specific time frame to avoid losing Medicaid coverage. No gifting.

The grandsons interest sounds solid but depending on the state they might end up having to sell after GM passes to satisfy any lien Medicaid might place on the property for her interest or come up with the funds.

I think it would depend on the Grands current situation and real estate laws in your state as well as Medicaid laws. Let us know how it turns out. It’s an interesting question. Either way, that 1/3 will have to be dealt with to create a clear title.

Here’s a link to a very good article about the positives and drawbacks of live estate. However, you still need to consult a good attorney for your particular situation.

https://www.rocketmortgage.com/learn/life-estate

The basics of life estate from the article:

Life Estate grantor (grandma) still owns the house and is responsible for taxes and insurance.

Life estate grantor shares ownership of the home with the grantees (grandsons).

Grantor needs approval from grantees to sell or borrow against the house, or revoke life estate.

Title to the house will be transferred to grantees immediately upon death of grantor.

I am with Alva here. If the house was deeded to the grandsons and Gma is not on the deed, then grandsons own it. They also may need to be paying taxes and water now grandmom is not living there. If she is on the deed, then the house can be sold and her 3rd goes to the NH for her care. Go to ur tax office and see whose names are on the billing. Your county clerk should have a copy of the deed.

Does the attorney specialize in elder law/estate planning? If not, I would find one who does. Laws vary by state and there are other undisclosed variables that probably impact your situation, so please don't act upon any suggestions given on this global and anonymous forum without getting a final opinion from a reputable attorney.

If the Grandmother is not on the deed at all, and has only life estate, I cannot imagine how she can sell a home that she in essence no longer owns. What does the lawyer say about that?
I am hoping Igloo is about as she is definitely the best at understanding law on some of these rules, which of course may vary state to state, which is why you need a lawyer to advise you.
Hoping others may know enough to inform you more.

Actually I was incorrect . Specifically, Both grandsons were on the deed "fee and simple" for over 10 years now.