Medical - Trusts, Annuities and Life Estates - How Life Estates Affect Eligibility for Medical Programs
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Medical - Trusts, Annuities and Life Estates - How Life Estates Affect Eligibility for Medical Programs

Revised October 28, 2007

Life estates

Purpose:
WAC 388-561-0300Life estates

WAC 388-561-0300

WAC 388-561-0300

Effective June 15, 2008

WAC 388-561-0300 Life estates

  1. The department determines how life estates affect eligibility for medical programs.

  2. A life estate is an excluded resource when either of the following conditions apply:

    1. It is property other than the home, which is essential to self-support or part of an approved plan for self-support; or

    2. It cannot be sold due to refusal of joint life estate owner(s) to sell.

  3. Remaining interests of excluded resources in subsection (2) may be subject to transfer of asset penalties under WAC 388-513-1363, 388-513-1364 and  388-513-1365.

  4. Only the client’s proportionate interest in the life estate is considered when there is more than one owner of the life estate.

  5. A client or a client’s spouse, who transfers legal ownership of a property to create a life estate, may be subject to transfer-of-resource penalties under WAC 388-513-1363, 388-513-1363 and 388-513-1365.When the property of a life estate is transferred for less than fair market value (FMV), the department treats the transfer in one of two ways:

    1. For non-institutional medical, the value of the uncompensated portion of the resource is combined with other non-excluded resources, or

    2. For institutional medical, a period of ineligibility will be established according to WAC 388-513-1363, 388-513-1364 and 388-513-1365.

This is a reprint of the official rule as published by the Office of the Code Reviser. If there are previous versions of this rule, they can be found using the Legislative Search page.

CLARIFYING INFORMATION

Unless the contract establishing the life estate limits one or more of these rights, the life estate owner has the right:

  1. Of possession;

  2. To use the property;

  3. To sell his/her interest in the life estate; and

  4. To receive income generated by the life estate.

WORKER RESPONSIBILITIES

  1. To evaluate a life estate, you need to know the:

    1. Date the property was transferred;

    2. Name(s) of the legal owner(s) who transferred the property;

    3. Name(s) of the new legal owner(s) of the property;

    4. Name(s) of the life estate owner(s) of the property;

    5. Rights of the life estate owner(s) to the property;

    6. Current fair market value of the property; and

    7. Client’s age as of the date the last birthday.

  2. Determine if the life estate is an excluded resource (WAC 388-561-0300 (2)).  If not, you need to determine its resource value and if adequate consideration was received for any transactions involving it. Use the life estate owner’s current age and the Life Estate Table in Appendix II (of the Long Term Care category) to determine the life estate factor of the owner. You need to know the fair market value of the property. Then:

    1. Multiply the current fair market value of the property by the life estate factor found in the table. This is the value of the life estate;

    2. Subtract the value of the life estate from the fair market value of the property.

    3. This is the value of the asset that was transferred for less than fair market value; and

    4. If the life estate is jointly owned, determine the client’s proportionate share.

  3. If the value of the transfer for less than fair market value causes the client’s resources to be over the standard, determine a period of ineligibility for LTC cases according to WAC 388-513-1365. For non-LTC cases, deny the application for excess resources.


EXAMPLE

Diana, a disabled 20-year-old single adult, owns a duplex with a fair market value of $50,000. This month, she transferred the ownership of the property to her mother retaining a life estate interest in the property, and she is applying for medical benefits (non- LTC). Diana retains the right to live in the property for the rest of her life and has the right to any income generated by renting out the other ½ of the duplex.

To determine the value of her life estate, we look at the life estate table and multiply the life estate factor next to Diana’s age (.97365) by the $50,000 value of the property, resulting in a life estate value of $48,682.50. We subtract this from the total value of the property ($50,000) and find that she transferred $1317.50 without adequate consideration. The resource standard for 1 person (SSI related) is $2,000.00. Since Diana has no other resources, and transferred an amount less than the resource standard, she is still eligible.

$50,000.00 value of property
X . 97365 life estate factor from table
$48,682.50 value of life estate

$50,000.00 property value
- 48,682.50 life estate value

$ 1,317.50 value of transfer without adequate consideration.

EXAMPLE

Same situation as above, except Diana also has $1,000.00 in a checking account. Now, when we add the value of the transfer of resources without adequate consideration to her other assets ($1,317.50 + $1,000.00 = $2,317.50), her resources are over the standard and she is ineligible for assistance this month (the month of the transfer), but you need to consider eligibility for MI. She may want to reapply the first of next month, if MI is not an option.


EXAMPLE

(Long-term care only)
Same situation as Example 2 except that Diana has been placed into a nursing home. Diana has stated she intends to return to her home. She has $1,000 in a bank account. When we add up the total resources ($1,317.50 + $1,000.00 = $2,317.50), she is over the resource standard ($2,000.00). Given the fact that the excess is less than the private nursing home rate, do not establish a period of ineligibility. Allow her to reduce her excess by applying it to her participation. (Refer to Available Resources in the Long-term Care section, EA-Z Manual).


EXAMPLE

(Long-term Care Only)

Mike is 85 years old and going into a nursing facility for a while after a stroke. He transfers legal ownership of his farm, valued at $100,000 to his son Gordon, retaining a life estate interest in the farm so that he can live there for the rest of his life. He has no other resources. To determine if there was a transfer without adequate consideration:

$100,000 total value of property
X .35359 life estate factor of 85 year old from table
$ 35,358 value of life estate

$100,000 total value of property
- 35,359 value of life estate
$ 64,641 value of transfer without adequate consideration

Mike is not eligible and has a period of ineligibility based on the transfer of a resource for less than fair market value, in the amount of $64,641. See WAC 388-513-1365, WAC 388-513-1364, WAC 388-513-1363. 

ACES PROCEDURES

See Interview - (RES1) screen (REMA)

See Interview - (TRAN) screen

For a Long-term care client follow WAC 388-513-1365. 

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Modification Date: October 28, 2007
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