Creating a Life Estate

Massachusetts Life Estates Lawyers

A life estate is a real estate form of ownership often used in connection with long-term care/Medicaid planning. A life estate is not a trust. A life estate is similar to a tenancy in common, in that two or more people have an ownership interest in the property, but the value of the ownership will depend upon the life tenant’s age rather than a fixed percentage of ownership. As the life tenant ages, that individual’s ownership percentage decreases.

Serving the Elderly and Their Families throughout Massachusetts

Unfortunately, there are different ways to measure the life tenant’s ownership interest. For Medicaid eligibility purposes, so-called Table 90CM is used. For IRS purposes, Table B is used. In this regard, while Table 90CM will provide a fixed amount regardless of the applicable interest rate, for IRS purposes, the value of the life estate interest will vary from month to month, depending upon the IRS’s published interest rate.

For example, in June 2007, at age 80 with property having a value of $400,000, a life estate interest for Medicaid eligibility purposes is _____. On the other hand, the value of the life estate for IRS purposes would be ____. The IRS computation is used to determine the amount of gain allocated to the life tenant if the property is sold during life.

If you have questions about setting up a life estate, send us an e-mail or call 617-523-1555 or toll free 888-759-5109. Free initial consultation.