Sale of Remainder Interest

Sale of Remainder Interest

The technique discussed in this article is another planning idea for a single individual owning a home and living with a child. However, the child has no special status such as having provided care or being dependent. The potential applicant has been advised to have private funds approximating one year’s nursing home costs to provide flexibility in choice of facility. Protection of the home is desired.

Recommendation: Remainder interest should be sold to child. The tables for determining the remainder interest can be obtained from your Medicaid office.

The transaction results in the parent having retained a life interest in the property and the child having purchased the remainder for an assumed amount of $60,000. Consequences are as follows:

A. there will be no transfer penalty;

B. applicant will be eligible when resource requirement is met;

C. eligibility can be accelerated by the payment of debts and the acquisition of excludable resources;

D. the retained interest of the parent (i.e. life estate) has special administrative treatment by the State of New Jersey (no value assigned to retained interest, retained interest not subject to Medicaid lien).

Note: If remainder interest were deeded to a “protected transferee,” there would be no period of ineligibility with respect to the transfer (see Post 6).

Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.


© May 2009, Post #36