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REAL ESTATE TRANSACTIONS IN ELDER LAW :
Forms of Ownership and Their Attributes

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In elder law, it is important to check your form of property ownership.

The forms of property ownership are many. It is important to check your deed and understand what you own and the meaning of that type of ownership. This article lists the most common forms of ownership and the key attributes for each one.

Husband and Wife, Tenants By The Entirety

Attributes:

  • Protection against creditors
  • Inherited by the survivor, without probate or new Deed
  • Excluded asset for a Medicaid recipient or community spouse
  • No Medicaid lien if community spouse outlives the Medicaid recipient
  • Resident homeowners can obtain a reverse mortgage as long as one of them is older than 55.

Husband and Wife, Co-Owners (Without Survivorship)

Attributes:

  • Protection against individual creditors only
  • Protection against eviction
  • At death of first spouse, survivor owns just ½; the other ½ passes via Will or Intestacy; new Deed needed
  • Excluded asset for a Medicaid recipient or community spouse
  • No Medicaid lien if community spouse outlives the Medicaid recipient
  • Resident homeowners can obtain a reverse mortgage as long as one of them is older than 55.

Single Unmarried Individual

Attributes:

  • No protection against creditors fully available
  • Probate asset - passes via Will or intestacy; new Deed needed
  • Countable (not excluded) asset for a Medicaid recipient; must be listed for sale
  • If a child, sibling, or possibly even a grandchild is living in the house, it will be treated as an unavailable resource and will not have to be sold until the family member moves out
  • Resident homeowner can obtain a reverse mortgage if over age 55
  • Excluded asset for a Global Options Home and Community Care (community Medicaid) recipient
  • Medicaid lien against the property if still owned at time of death (Nursing Home and Global Options Home and Community Care programs).

Parent and Child, Joint With Right of Survivorship

Attributes:

  • Parent's half available to own creditors
  • Child's half available to child's creditors
  • Child's half may be subject to equitable distribution
  • Non-probate asset - passes to surviving joint owner without probate or new Deed
  • Protection against eviction - all owners have the right to occupy the premises
  • If parent gives child the ½ interest, this creates a potential transfer penalty if done within 5 year look-back before a Medicaid application for the parent
  • Medicaid lien against the ½ interest in the property if still owned at time of death (Nursing Home and Global Options Home and Community Care programs), even if the child joint owner survived; enforcement of the lien will be delayed until the child moves out or sells the property.

Sibling Co-Owners, Joint With Right of Survivorship

Attributes:

  • Each owner's pro rata interest available to own creditors
  • Each owner's pro rata interest may be subject to equitable distribution
  • Non-probate asset - passes to surviving joint owner w/o probate or new Deed
  • Protection against eviction - all owners have the right to occupy the premises
  • If owner gives sibling a partial interest, this creates a potential transfer penalty if done within the 5 year look-back before a Medicaid application, unless sibling already had an equity interest in the property
  • Medicaid lien against the pro rata interest in the property if still owned at time of death (Nursing Home and Global Options Home and Community Care programs), even if the joint owner survived; enforcement of the lien will generally be deferred while the joint owner lives there.

Parent and Child, Co-Owners Without Right of Survivorship

Attributes:

  • Parent's half available to parent's creditors
  • Child's half available to child's creditors
  • Child's half may be subject to equitable distribution
  • Probate asset - the ½ interest passes via Will or intestacy; new Deed needed
  • Protection against eviction - all owners have right to occupy the premises
  • If parent gives child the ½ interest, this creates a potential transfer penalty if done within the 5 year look-back period before a Medicaid application for the parent
  • Medicaid lien against the ½ interest in the property if still owned at time of death (Nursing Home and Global Options Home and Community Care programs), even if the child joint owner survived.

Sibling Co-Owners, Co-Tenants Without Right of Survivorship

Attributes:

  • Each owner's pro rata interest available to own creditors
  • Each owner's pro rata interest may be subject to equitable distribution
  • Probate asset - passes via Will or intestacy; new Deed needed
  • Protection against eviction - all owners have right to occupy the premises
  • If owner gives sibling a partial interest, this creates a potential transfer penalty if done within 5 years before a Medicaid application, unless the sibling already had an equity interest
  • Medicaid lien against the pro rata interest in the property if still owned at time of death (Nursing Home and Global Options Home and Community Care programs); enforcement of the lien will generally be deferred while the joint owner lives there.

Grandparent and Grandchild

Attributes:

  • Same as with Parent and child, whether with or without survivorship
  • If grandparent gives grandchild the ½ interest, this creates a potential transfer penalty if done within 5 years before a Medicaid application for the grandparent, even if the grandchild has been living there and taking care of the grandparent.

Retained Life Estate

Attributes:

  • Remainderman can be spouse, child, grandchild, or anyone else.
  • Holder of the life estate is legally obligated to pay all expenses of regular maintenance, upkeep, and taxes, and can also deduct these to the extent they may be deductible.
  • Holder of life estate is entitled to all rents from the property. The rents are countable income.
  • Holder of life estate entitled to exclusively occupy the premises.
  • Life estate extinguishes at death.
  • There is no Medicaid lien against a life estate.
  • Transfer of property with retained life estate causes a transfer penalty if done within the 5 year look-back prior to the elder's Medicaid application. HCFA tables are used to value the remainder which was transferred. The transfer penalty is less than that for an outright 100% conveyance.
  • Transfer within 3 years prior to death must be recaptured and reported on the NJ transfer Inheritance Tax Return. Caution: The tables used to value the life estate and remainder are different than the HCFA tables used for Medicaid purposes.
  • Release (gift out) of a life estate to the remainderman causes a transfer penalty if done within 5 years prior to Medicaid application.
  • Sale of a life estate avoids a transfer penalty, but results in excess resources for a person already on Medicaid. If the proceeds are not spent down that same month, the individual will go off Medicaid until the resources are again at eligibility levels.
  • Rents are included as income for a life estate holder who is on Medicaid.
  • Protection against eviction, and against remainderman's creditors; their creditors would take the property subject to the life estate.
  • Protection against eviction in case of equitable distribution should remainderman get divorced.

Investment in Child's Home

"Cash" purchase of an equity interest in the child's home, or payment of the expenses to build a suite onto the child's home to accommodate the parent(s) who will live there

If there is an equity interest, there can be some protection against creditors, eviction and the like. The partial interest will be subject to a Medicaid lien if there is no spouse living in the home.

If no equity interest is purchased, with sufficient documentation, the payments will not be viewed as gift transfers. However, there is no protection against eviction or the child's creditors.

The parent(s) may want to buy a life estate instead. Confer with a tax advisor regarding the impact of this transaction on both buyer and seller. The parent must remain in the home for one year after this purchase for it to not cause a Medicaid transfer penalty.

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