5333 Life Estates - Ownership interest in a property where a life interest has been conveyed is considered a countable asset for the owner according to the provisions of this section.
With a life estate, the holder retains the right to use the property during his or her lifetime, but actual ownership of the property is transferred to another person or persons. Establishing a life estate is essentially a means of limiting property ownership to a person’s lifetime. To assess the individual’s interest in the property, determine if the individual has a life interest or remainder interest in the property:
Life Interest - Also known as the owner of the life estate, or the life tenant, the person owning the life interest retains the right to use, occupy and receive the income from the property during his or her lifetime. This individual is assumed to be responsible for the mortgage, taxes and insurance on the property.
A life interest can be established by transferring the underlying property and retaining a life estate on property the individual owned or by receiving a life interest in property in which another individual owned the underlying property. In both cases, the individual’s ownership is limited to the life interest. The value of the life interest is determined by the life tenant’s age.
Remainder Interest - Also known as the remainderman, the person owning the remainder interest does not have rights to possess the property until the life estate is terminated. Just as with a life tenant, the remainderman may have assumed the property through a transfer to him from property originally owned by another or by transferring a life interest to another in property he owned.
5333.1 Treatment of Life Estate Ownership - Both the life interest and the remainder interest in property are countable as a resource. However, property in use as a home or income producing may be exempt. For property currently in use as a home, see 5340. If the property is income-producing, refer to 5332. Exemptions apply only to the specific individual meeting the exemption.
Example: Edna transferred a remainder interest to her son, Dave. Edna continues to live in the home. The life interest is exempt for Edna as she is living in the home. But, the remainder interest owned by Dave is countable if he were to apply for assistance.
Either the remainder owner or the life tenant may sell their individual ownerships without the permission of the other. The refusal of the other owner to sell is not considered a legal impediment to the sale, but may be used as an argument to reduce the fair market value of the property per 5331.1.
5333.2 Valuing the Life Estate - The value of either the life interest or the remainder interest is established by considering the life tenant’s age and total value of the property. The value derived from using the Life Estate Valuation Table, which establishes a value based on the an actuarially determined life expectancy of the life tenant.
However, the applicant/recipient may provide evidence to demonstrate a lower fair market is applicable.
Example: Nancy is a 56 year old woman with terminal cancer. She named her adult son, Adam, as the remainder owner on her home a number of years earlier. Using the life estate valuation table, the fair market value of her life estate is $12,000, because of Nancy’s age. But, given her health status, Adam cannot find a buyer. Adam and Nancy may demonstrate a fair market value based on factors other than Nancy’s age, such as her health status.