The Elder Law Forum

The Elder Law Forum
Life estate may not protect farm

Medicaid is a federal-state program, financed jointly, but administered by the states. It is, operationally, not one program, but 50 programs. Where you live may determine your eligibility.

Choose your state carefully. Some states are more generous than others. A Medicaid beneficiary who moves to another state does so at some peril.


A senior legal helpline caller described such a case. "I have a problem and sure could use some advice," she wrote. Her parents own 900 acres of farmland, plus 50 acres of farmland inherited by her mother. Her father contracted Alzheimer's and when his condition worsened her parents moved to another state to live with the caller's sister.

Two years ago her father was admitted to a nursing home, while her mother continued to live with her sister. Ten years ago her parents conveyed their farm land to their children, retaining a life estate as part of an estate plan designed to protect the family farm from creditors. "We do want to keep the farm intact and retain ownership," she said.

The problem is this: Her sister will be moving to a coastal state. Her mother wishes to return to her home state where the family farm is located and have her husband admitted to a nearby nursing home. "The problem," she advised, "is that the home state will count the life estate as an asset and as such my father will not qualify for Medicaid until we, the beneficiaries of the life estate, buy out his share and spend that on his care." The other state did not count the life estate, determining that a non-saleable life estate has no market value.

I advised the caller that a decade ago, when her parents created the life estate, most states did not count assets in a trust created more than 60 months prior to applying for Medicaid. Medicaid eligibility has tightened significantly since then. Congress mandated all states to implement an estate recovery program.

Some states – like the one where her father is presently residing – only consider trust assets that pass through probate. Their home state, however, uses established longevity tables to place a value on life estates. In this case, the tables and her parents' life expectancy will determine the "spend down" required to restore his Medicaid benefits."

Medicaid planning is a state-by-state proposition. Choose your elder law attorney accordingly.

Pro bono legal information and advice is available to persons 55 and older through the USD Senior Legal Helpline, 1-800-747-1895; mmyers@usd.edu.

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