This article is a section taken from MA for People Who Are Age 65 or Older or People Who Are Blind or Have a Disability (MA-ABD), a part of the revisions and additions to the Minnesota Health Care Program Eligibility Policy Manual.
Life Estates and Remainder Interests
A life estate is an ownership interest in real property. The right of ownership exists for the lifetime of the person holding it, the lives of one or more other designated persons, or one or more other specified conditions within the lifetime of the life estate owner. A life estate document specifies when the life estate terminates.
The owner(s) of a life estate is called a “life tenant” or “tenant for life.” Generally, a life estate entitles the life tenant to occupy, possess or otherwise use the property as long as he or she lives.
When the owner of property gives it to one party in the form of a life estate and designates a second person to inherit it upon the death of the life estate owner, the second person has a remainder interest in the property and is referred to as a remainderman.
A life estate is generally created:
- When a person with property rights in real property transfers a remainder interest in the property to another and retains a life estate in the property
- When a person purchases a life estate interest in someone else’s property
- By operation of probate law
Rights and Responsibilities of the Life Estate Owner
The life estate owner:
- Has the right to occupy, possess, or otherwise use the property until the life estate is terminated
- Has the right to sell the life estate interest if not prohibited in the legal instrument establishing the life estate interest
- Is entitled to all income and profits of the life estate interest, such as rent on the property
- Cannot sell the property or the remainder interest
- Is responsible for paying the mortgage, taxes, and insurance on the property
- Is responsible for the upkeep and the repair of the property
Rights of the Remainderman
The remainderman has ownership interest in the property subject to the life estate interest. The remainderman does not have the right to occupy, possess or otherwise use the property until the life estate is terminated.
The remainderman can:
- Sell his or her interest in the property even before the life estate interest terminates, if allowed by the legal instrument establishing the life estate interest. In such cases, the life estate owner retains the life estate interest until the life estate terminates.
- Sell the entire property with the permission of the life estate owner
Life Estate Evaluation
Life estates are treated as real property.
- If the life estate is the person’s principal place of residence, it is considered homestead property and is excluded.
- If the life estate is not the person’s principal state of residence, it is treated as non-homestead real property. However, a person is not required to make a good faith effort to sell a life estate because life estates are assumed to not be saleable. Therefore, non-homestead life estates are considered not available and are not counted.
The proceeds from the sale of a life estate interest are counted as an asset in the month following the month of the sale if retained:
- When the property is sold
- When the remainderman or someone else purchases the life estate interest
Determining the value of a life estate interest in real property
The value of a life estate interest in real property is the property’s equity value, multiplied by the person’s mortality figure based on the person’s age, as determined by the Life Estate Mortality Table.
If there are two or more life estate owners, each life estate owner has a different amount of life estate interest due to differences in the owners’ ages.
Remainder Interest Evaluation
Remainder interests are treated as real property and counted as an asset.
Determining the value of a remainder interest
The value of a remainder interest when a person is a remainderman is the property’s equity value, multiplied by the remainderman mortality figure that corresponds to the life estate owner’s age, as determined by the Life Estates Mortality Table.
When the Remainder Interest is Available to the Life Estate Owner
If a person owns both the life estate interest and the remainder interest, the life estate and remainder interests merge into full ownership of the property. The property is evaluated as a non-life estate real property.
Minnesota Statutes, section 256B.056, subdivision 1a
Minnesota Statutes, section 256B.056, subdivision 4a
CREDIT: The content of this post has been copied or adopted from the Minnesota Healthcare Programs Eligibility Policy Manual, originally published by the Minnesota Department of Human Services.
This is also part of a series of posts on Minnesota Healthcare Eligibility Policies.