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By selling the property, it removes it fom being exempt to a non-exempt asset. And the proceeds from moms share will take her over the Medicaid limits for assets.
Also I'm pretty sure that everybody on the LE has to agree to the sale.
And for more fun in this, IF one of the kids on the LE wants their share in full, payable to them at the act of sale & will not sign off on the sale unless that happens, they don't have to.
I'd bet the LE was done to enable mom to pay lower taxes, etc due to senior status but bypass probate upon her death. 10 years ago there was no imagining mom in a NH that costs 5-15K a month. There was no required MERP - Medicaid estate recovery. MERP in some states can go after recovery from LE. Your attorney should be able to tell you what system is being done for your state.
Often with an LE, the house is rented as you want the ownership to stay as done by the LE and not transfer till after death and not have to deal with the whole Medicaid eligibility/ineligibility. Whether its 1 year or 8 years till death, it rented till mom dies. It needs to be rented for fair market value and the rental income used to pay the required on the house (taxes, insurance, reality, etc). But if there is rental income left over after the required paid or set aside, it becomes income that must be paid to the NH for mom to stay on Medicaid. If you go this route, you kinda need to be very clear with Medicaid as to how rental income is to be dealt with for compliance for your states program. You still could have to deal with MERP as well, so you need to keep receipts, etc well documented. There are a couple of folks on this site who rent out their moms house & mom is on NH Medicaid. It can be done.
Good luck & let us know what happens. We all learn from each other!
In some states you can sell your interests, but there is a formula that calculates how much it's worth based on the Life estate holder's age. It looked complicated to me.
I'd make very sure, I got an attorney who has dealt with it before and is qualified. Most attorneys are not going to know off hand. Get one that does and who can properly advise you.
LE are kinda interesting in that they seem to have been the trend for estate planning in the 1990's & early part of this millennium. But really don't work well now if medicaid is needed as the rules & compliance for medicaid have changed. Trusts seem to be the preferred trend now for estate planning. But whatever the situation, once on Medicaid, the family of the elder has to have the ability to front all the costs on the property as renting can have fluctuations & may not cover all the costs on the property.
Friendly - if it's looking like the " sale" will be to a family member & less than FMV or under current tax assessor value, I'd suggest that you get an appraisal done asap on the property. This needs to be done by a residential appraiser who is licensed however it's done for your state. If the house is older and with decades of delayed maintenance, it could be appraised significantly lower than assessor value or what the comps come in from a Realtor. Often it's suggested that the house also get inspected (this too by a licensed residential inspector) first and the house inspection report provided to the appraiser to be able to provide a truly comprehensive report on the property. Comprende? Good luck and let us know what ends up being the plan!