My 92-year-old mother entered a nursing home. She has a life tenancy (life estate) with my brother and I as the other owners. Can we sell the house?

Sled - I’d caution again that if Medicaid application is anticipated for your mom it needs to be sold at FMV. You have lots of interlocking parts for your mom’s situation & medicaid rules can be overlooked in the rush to get it sold. Realtors interest is getting it sold & commission paid.

There imo is a too TOO large of a gulf btw $379k valuation — $300k for it sell at $300k and be considered FMV by Medicaid.

I have a suggestion, get it appraised and you want as much as possible “conservative appraisal” route. You may need to get it inspected first then inspection report given to appraiser as inspection details flaws. Both licensed professionals for your state. The conservative appraisal you hold for any future Medicaid issues; it is not part of the Realtor packet, does not necessarily exist as far as listing is concerned. Comprende? It make actually read “not for mortgage lending”. These get done like for probate or undivided interest stuff. The Realtor may say “I can pull a valuation on the house based on comps sold for you for free” but this is not a true legal document like an appraisal is as appraiser has their seal on the document with state registration and licensing notated. It’s viewed as an independent unbiased valuation. Realtors isn’t as they get a commission from sale. You don’t want her Medicaid application to get stalled or declined due to FMV issues, so having an appraisal that say comes in at $312,770 helps deflect that concern. Comprende?

Is this atty going to shepherd your mom’s LTC Medicaid application?
You need to make sure that they look at all this from both her LTC NH Medicaid eligibility as well as you twos SSDI $ from unearned income allowed aspect. You have lots of interlocking parts with input / reviews from governmental entities, there’s gonna a cockup somewhere. Mom’s selling a $379,000.00 property is going to be a red flag and stall her Medicaid application or renewal. The atty needs to be in this for the long haul..... not just clear you & bro getting 50% of mom’s house sale $. They have got to do that plus deal with her LTC Medicaid application and any eligibility issues & likely first year renewal, plus deal with the determination of tenant / remainderman % and any IRS filing & taxes owed from each %. The good thing is you have 100k+ to pay all atty, CPA, etc costs.

I’m assuming in all this that your mom hasn’t yet filed a Medicaid application; that’s shes either still in post hospitalization rehab phase at the NH (MediCARE pays) or she’s private pay in spend-down mode. To me to lessen issues, you want to keep her private pay till house sold and $ fully distributed. AND that atty needs to do her Medicaid application and possibly the first year renewal (if your state does these).

Are taxes are paid & up to date? Usually taxes due in full end of January most places. Look for her tax bill, should have been received Oct/Nov. If you can’t pay it, ask the Realtor how that poses issues.... like buyers can sense there’s $ issues and shift closing & other costs onto seller. If the place is likely to be sold to a flipper/developer rather than a family getting a traditional mortgage, they will have already run a quick tax & lien search to see if its a vulnerable seller.

If cash flow issues, Mom may be able to do a small line of credit HELOC. There are online HELOC lenders which are more ahem “flexible” but higher interest than your local bank which will require her in person to do application. Not a RM (reverse mortgage) but a small HELOC.

Renting can be a sticky.
Rent is income to owner, which - I think - is only mom at this point in time as it’s her LE. I think for LE as mom is alive the remainderman aren’t yet owners so no share of rent, I’m not 100% though. Plus there’s all those tax issues, insurance & codes on dealing with rental income.

All Income has to be reported if a Medicaid application or Medicaid eligibility is involved.
Plus Medicaid wants it rented at FMV, unless there is good reason as to why it’s shouldn't. Like caregiver lived in home prior to application. Or disabled heir / family is the tenant. I think JoAnn has insight on this.

Where I live, rent in desired areas are easily 2k-3k a mo. which would take a person over monthly income maximum for LTC Medicaid without even counting in their SS$.

Sled - when you speak with Realtors, clearly ask each what their DOM averages are. Days on Market. Some Realtors are real gunners and will be quite frank as to “priced to sell” vs. “priced to list” and won’t take priced to list properties. I’d suggest you look at mom’s checkbook to see what DOM of having a house to be market ready could likely cost.

If it looks like going on for a long time, you might want to consider renting out the house until your mother's death. That would at least give you some income and simplify the end requirements.

Igloo has raised a good point about timing. On second thoughts, if I were acting for a purchaser, I would require the Life Interest to be cleared off the title first. Otherwise the purchaser’s lawyer/ conveyancer is also ‘guaranteeing’ that it has all been done correctly. This could take at least six months, so it is the first step, well before you get as far as preparing the house for sale. Please don’t rely on guesses – for example, a Life Interest does NOT mean that your mother owns a third of the property. It means that she has the right to live in it until she dies. You need a lawyer. Here, all lawyers can handle real estate matters including sales and registrations, but in case that is not the same where you are, please check that the lawyer you go to about the Life Interest can take it all the way through.

None of this is a DIY project. You need an elder law atty and a real estate / tax attorney imo for your moms interest. And a disability atty for you & your brother. And I’d suggest you meet with them BEFORE putting house on the market and getting a Realtor.

Life Estate property is unique in that for your mom it has a current and a future interest. Should property be sold before her death, there will be “remainderman share / tenant interest” determination done which can be considered income the month the Act of Sale goes through and then an asset afterwards. (IRS has tables on this and it’s keyed into actuarial tables, usually the determination needs a certified tax attorney or CPA to do as they do a remainderman determination letter and do the tax filing needed.)

Having $150k+ each transferred to you and your brother without a review by or approval by both SSA & Medicaid imo will not happen. The $ will surface attached to your names and SS#s and eligibility will be reviewed.

If you are thinking that as SSDI is not “needs based”, any inheritance doesn’t matter. But it’s not an inheritance. She’s still alive so house sale $ is the sale of an asset that needs all “owners” to sign off on and that - my understanding is - will produce unearned income for each of you from brother & your remainderman interest PLUS gifting of $ from mom of her tenant % share to you & brother. It’s complicated and it could be for more fun...... taxable income as well. I’d suggest you need to clearly find out ahead of any listing:
- from the disability atty as to exactly what all this $ does to your & your brothers determination from SSA for each of your SSDI or SSI.
- if the $ from mom to you both can be considered gifting by LTC Medicaid program for her or if it has to be placed into a supplemental or special needs trust that is Medicaid compliant.
Its going to be a cascading of legal thats going to need to happen imo.

You all - the trio of mom, you & your brother - imo will need their own paperwork done by elder law, SSA savvy disability law and tax law attorneys to lessen any issues with Medicaid and taxes. $300 k - $380k is just too much $$$ to just assume can be transferred without repercussions. Not a DIY. The property can be put up as securitization to pay the attorneys.

Also for more extra fun in this, if you or bro are married that your spouses may have to sign off at the Act of Sale. So everybody has to agree to the buyers offer, terms of the sale and how divvied up. Please PLEASE reread Margaret’s post, she’s spot on that Life Tenancy can pose extra issues for the Realtors to get to the Act of Sale. We bought LE land (house destroyed) post Hurricane Katrina, our offer had all costs including Title insurance paid by seller. For LE shifting title cost to seller is just what’s done as each person on LE might have liens or judgements that elder (tenant) unaware of as it was the elders credit history that did the original now paid off mortgage. The sale was Mom & 3 grown kids; the caregiver son assumed 2 siblings would give their remainder % to mom; they refused and required at Act of Sale their each very own cashiers check with all closing costs paid from moms share. Bet there’s no big family Xmas for this group...

If you have been fronting property costs (like taxes), you should speak with the atty as to doing a Promissory Note with mom to reimbursed those costs as a separate item excluded from the end proceeds from the sale. Good luck with the attorneys.

Is Mom still on the deed? If so selling will be the problem. She owns a third of the house. Is she private pay or Medicaid? If Medicaid did you explain about the house when applying?

You say she signed it over, then you say other names. I agree, you need to talk to a lawyer and one versed in Medicaid.

This is really tricky. You definitely need a lawyer, and probably her doctor as well to say that she is competent to sign whatever is required. It sounds as though she does understand this, even though she may not be 'competent' on other matters, and that is not easy to document. It's difficult - life tenancies were usually based on the assumption that the 'tenant' would die at home. I drafted one once that had provision for alternative housing being provided. It was unusual, but you should first check the will or other document that set up the life tenancy, just in case there is something similar. Details probably wouldn't be recorded on the property title. The chances of your mother challenging the title would be very low, but the purchaser may not be willing to take the risk. Indemnities might work, and you might need to quarantine the sale proceeds for a fixed time to back up the indemnity. Good luck!