Medical Assistance for People Who Are Age 65 or Older and People Who Are Blind or Have a Disability

2.3.3.2.7.4.3 Life Estates and Remainder Interests (Archive)

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

Evaluation of a Life Estate Owner's Interest

Life estate interests are treated as real property.

• A life estate interest in a person's principal place of residence, is excluded as homestead property.

• A life estate interest that is not excluded as homestead property, is treated as non-homestead real property. However, MA enrollees are not required to make a good faith effort to sell a life estate interest in non-homestead real property because life estates are assumed to not be salable. The life estate interest is considered unavailable and is not counted towards the MA asset limit.

The value of a life estate interest is counted as an asset in the month following the month :

• The property is sold

• 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 estimated market value (EMV), multiplied by the person’s mortality figure, as determined by the Life Estate Mortality Table. The value of the property may be determined by a licensed real estate appraiser if the accuracy of the EMV is disputed.

The value of a life estate interest at the time the property is sold is the sale price of the property multiplied by the person's mortality figure as determined by the Life Estate Mortality Table. Expenses related to the sale of the property that are the responsibility of the life estate owner are deducted from the value of the life estate.

If there are two or more life estate owners, each life estate interest is calculated separately based on each owners age.

Evaluation of a Remainder Interest

Remainder interests are treated as real property and are a countable asset.

Determining the value of a remainder interest in real property

The value of a remainder interest in real property 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 and the equity value of the property is a countable asset.

Legal Citations

Minnesota Statutes, section 256B.056, subdivision 1a

Minnesota Statutes, section 256B.056, subdivision 4a

Published: January 1, 2019

Archived: September 1, 2022