I question the ability of the lawyer who drew up the Life Estate for my mom. My dad always took care of the business stuff, never taught anybody anything, he just wanted to do it all himself. As a result, when my dad passed away, my mom was clueless how to buy a car, get insurance, etc. I have no clue where the Life Estate idea came from but back in 2008 my mom went to a lawyer who had her sell me her house for $1 with a Warranty Deed and then she retained a Life Estate interest for herself. A paper is included showing that the transaction was recorded on the books by the Registrar of Deeds in the county office.
There is no way my mom could have known at the time that she might need to go to the nursing home in 20 years and be on Medicaid. I talked with 3 different lawyers about this and received 3 very different answers but one lawyer did send me the following:
On May 16, 2017, the Nebraska Legislature passed L.B. 268 that expands asset recovery for Medicaid beneficiaries. Under the new bill, the definition of “estate” will now include any real estate, personal property, or other assets in which a Medicaid beneficiary had any legal title or interest, at or just prior to death, including insurance policies and annuities (unless paid for by someone other than the Medicaid beneficiary or his or her spouse), securities, bank accounts, intellectual property rights, contractual or lease rights, or other similar assets. Assets that are excluded from recovery include insurance proceeds or trust accounts meant for funeral and burial expenses, conveyances of real estate made prior to the effective date of the Act that are subject to a life estate, and any pension rights to the extent they are exempt from Medicaid recovery claims under federal law.
My mom is currently on Medicaid Waiver for home care which means if she goes to the nursing home, she will be in a Medicaid bed from day 1. We are concerned that if the house remains in a Life Estate, it may affect her eligibility to get on Medicaid for the nursing home. If she gets a 6 month penalty, she wouldn't have the ability to pay for it and I wouldn't either. If my mom gets booted from the nursing home because of the Medicaid penalty, where would she go? According to one of the lawyers, Medicaid would expect me to pay fair market value for rent if I continued to stay in her house, but since I don't have a job and can't pay rent, I would have to move out and the house be rented to someone with the ability to pay. The good news is I would only be homeless until my mom dies, then the house goes to me and as the new owner I could evict the tenant so I could live in the house.
I'm guessing that the house will be a really hard sell. It's a small house on a small lot with no room for expansion and in a small town. It's best suited for one or two people but would not work for a family. The big downside is the house will need work plus it will have an ugly front porch with a vertical lift that I can't stop from being built. There is no way this house could be sold quickly to pay for my mom's nursing care but if I deed the house back over to my mom, MERP could deal with the house being on the market for a year or more after my mom passes. By the time the Medicaid funded renovations to my mom's house have been complete, most of the value of the house will have been used.
Every lawyer has told me not to deed the house back over to my mom, but I think that's the only thing that makes sense. I don't think the lawyer had a clue what he was doing when he set up the Life Estate in the first place.
If I can get a job, a friend of mine has an old camper he'll take payment on and I'll just live in the camper.
Or, can you claim that your Mom "intends" to return home while you pay the expenses (taxes, insurance, maintenance) on the home and use the caregiver's exemption to live in the home since you have taken care of her and kept her out of a nursing home for two years? Are the expenses more or less than the rent?
How do the house expenses compare to the old camper?
Is there any potential for income from the house from a roommate, AirB&B, garage or storage building rental, RV parking, ...?
I don't see an advantage to signing over the house now vs. dragging your feet about moving out, finding out what the rent really would be, eventually moving if required, and hoping the remainderman claim is of some value. Have a frank conversation with the Medicaid folks and let them know what you can afford to pay.
It might be different if you are almost ready to move on and just start over somewhere else where you can find a decent job and hope for inexpensive housing. If you don't have a sentimental attachment to the house and don't expect it to have much value after it has been a rental or been vacant, maybe sign it over and move on. Especially if you cannot afford the expenses now or expect to in the future.