Life Estate Deeds: A Way to Save the Home
A Life Estate deed can save the home from having to be sold to pay the nursing home bill. When the deed is signed, the owner entirely owns the home until the owner(s) dies. Upon the owner’s death, the named beneficiaries own the home automatically. The Life Estate deed must be signed more than five years before the person signing the deed (the owner of the home), might have to enter a nursing home. If the owner or the owner’s spouse (usually both spouses jointly own the home) does not have to apply for MassHealth benefits to pay the nursing home bill within five years from the date the Life Estate deed is signed, the home can be safely passed to the beneficiaries without having to go to court. Who are the beneficiaries? The beneficiaries are the people the owner wants to own the home upon the deaths of the owner and the owner’s spouse. This five-year waiting period is called, “the five-year lookback.”
If the owner and/or the owner’s spouse has to apply for MassHealth benefits within five years from the date the deed is signed, the beneficiaries have to sign a deed giving back their ownership interest to the owner(s). MassHealth calls this process, “the cure”, which is the process of returning a gift made within the five-year “look-back” period from the date the owner (or spouse) made a gift, any gift.
Without a Life Estate deed, upon the death of the owner and spouse, the Estate Recovery Unit through the probate court process, will force the sale of the home and the net proceeds must be paid to the Commonwealth of Massachusetts to pay the state back for the MassHealth payments made to the nursing home during the owner’s life.
Because of the five-year look-back, I recommend that Life Estate deeds be signed sooner rather than later.