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

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 may be 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

Life Estate Evaluation

Life estate interests are treated as real property.

Homestead life estates: If the life estate is the person's principal place of residence, it is homestead property and is excluded.
Non-homestead life estates: If the life estate is not the person's principal place of residence, it is non-homestead property.
- If a non-homestead life estate is owned by the applicant or enrollee, it is not counted toward the person's asset limit. The applicant or enrollee is entitled to any income derived from the life estate. DHS places liens on non-homestead life estates owned by certain enrollees. See MA Estate Recovery Manual for more information.
- For MA-LTC, if a non-homestead life estate is owned by the community spouse, the life estate is included in the couple's asset evaluation.

Determining the value of a life estate interest

The value of a life estate interest is the property’s equity value on the date the life estate interest is created, terminated, or sold, 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 on the date the life estate was created is based on the equity value of the property on the date the life estate was established.

The value of a life estate on the date the life estate was terminated is based on the equity value of the property on the termination date. The termination date is the date of death of the life estate owner or, if termination is due to a specific condition in the deed or contract, then the date the condition occurred.

The value of the life estate at the time the property is sold is based on the sale price of the property. 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 interest.

The proceeds from the sale of a life estate interest are counted as an asset in the month following the month of the sale, if retained:

When the property is sold
When the remainderman or someone else purchases the life estate interest

Multiple Owners

If there are two or more life estate owners, each owner's life estate interest is that owner's share of the equity value multiplied by their mortality figure. Absent evidence to the contrary, each owner is presumed to have an equal equity interest in the property.

Example: Frank (age 85) and Norma have life estate interests in non-homestead property. Frank is applying for MA. The total equity value of the property is $100,000. Frank has a mortality figure of .35359 and presumed equity value of $50,000 because there are two life estate owners. Therefore, Frank's life estate interest is valued at $17,679.50 (.35359 x $50,000)

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