OP, your aunt needs a lawyer stat. If she is truly failing, then she may not outlive her assets. If she rallies, then you/she needs to know soonest about her options. She may meed to come up with the $50K if she disposes of all her assets in less than five years and needs to apply for Medicaid.

The life estate sounds a bit odd, especially if it is not for a partner or an adult dependent taking care of your aunt on a near/FT basis. And i agree about not wanting to subsidize your aunt in order to preserve this inheritance for this couple. DH has a situation with his parents - they balk at spending money and he explains that he will be there to help them if it comes to that. His primary motivation is: why should he cover his parent expenses in order to preserve an inheritance for his sister who was a spendthrift in her younger years while he lived within his means.

GL and get going!

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Is her friend a girlfriend or boyfriend? The life estate lets them live at the property before they die. This sounds like she's trying to take care of them

Typically a life estate transfers ownership to another person and the original owner gets to live there until death. It may or may not have been a legal transfer, who knows. But OPs aunt has made a mess. She needs a lawyer.

Technically anyone can have a life estate in a property if the deeds were done properly. I'm still guessing that the aunt was closeted and is taking care of a partner

I know OP says this is not the case. But sadly even today this is an issue for people with same sex partners.

Even if they are legally married?

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Is her friend a girlfriend or boyfriend? The life estate lets them live at the property before they die. This sounds like she's trying to take care of them

Typically a life estate transfers ownership to another person and the original owner gets to live there until death. It may or may not have been a legal transfer, who knows. But OPs aunt has made a mess. She needs a lawyer.

Technically anyone can have a life estate in a property if the deeds were done properly. I'm still guessing that the aunt was closeted and is taking care of a partner

I know OP says this is not the case. But sadly even today this is an issue for people with same sex partners.

^^
"However, after she dies, the state will try to recover from the estate."

Is this correct? Does that now apply to a homestead property? If so, it must be a new law because that wasn't what happened with my parent's home. After death, it was sold and Medicaid did not try to recoup any of the expenses for the 7+ years in a nursing facility.

https://www.medicaidplanningassistance.org/medicaid-eligibility-florida


Florida:

Nursing Home - monthly income limit: $2523. -- asset limit. $2,000

The home is an exempt asset in Florida if she plans to return to live there and equity is less than $636,000. However, after she dies, the state will try to recover from the estate.

With Florida Medicaid, under certain circumstances the home can be trasferred and become an exempt asset.

Florida Medicaid allows transfers of homestead in the following circumstances:

Legal spouse
A child under 21
A blind or permanently disabled child
A sibling who has equity interest in the home
Adult son or daughter

Rental properties are exempt assets under Florida law. But the rental income counts as income.

A life estate interest in a property is exempt as a Medicaid asset if the life estate was set up 5 years before applying for Medicaid. Except for Ladybird deeds. "A Lady Bird Deed is a transfer of property to another with a reservation of a life estate. Meaning a person can transfer property and retain ownership in that property until death, at which point it will then transfer to the other."

"Lady Bird Deeds and Medicaid/MERP
Say you want to apply for Medicaid benefits, and you have transferred property within 60 months prior to a loved one, for less than what their fair market value is (i.e. gifting your house to your children) Medicaid will then apply a transfer penalty against you. For example - you give your child your house for $10,000 but the house is actually worth $100,000 fair market value, Medicaid penalizes you by delaying in months your eligibility date. But, if you use a Lady Bird Deed, you still have full control over that property, and it does not activate this "transfer penalty."'

If you have too much income and assets to qualify for Medicaid on face value, in Florida you can apply via the "Medically Needy Pathway".

1) Medically Needy Pathway – Florida has “Share of Cost” Program, also called a “Spend-Down” Program, for persons who apply for Regular Medicaid / Medicaid for Aged and Disabled and have income over the Medicaid limit. This program allows persons to become income-eligible for Medicaid services by spending the majority of their income on medical bills (i.e., health insurance costs, such as Medicare premiums, and medical service bills). In 2022, the medically needy income limit in FL is $180 / month for a single applicant and $241 / month for a married couple. The “spend-down” amount is the difference between one’s monthly income and the medically needy income limit. Once the “spend down” is met, one will be Medicaid eligible for the remainder of the month. The medically needy asset limit is $5,000 for an individual and $6,000 for a couple.

SO your aunt would spend all of her monthly income on nursing home care, except $180. Then Medicaid would pick up the remaining cost.

So if your aunt's Social Security income was $2000 a month, and a nursing home costs $7000 a month, she would pay $1820 and get to keep $180 from her monthly check. Assuming all her assets were gone or exempt, the state Medicaid system would then cover the remaining $5180 each month.

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Is her friend a girlfriend or boyfriend? The life estate lets them live at the property before they die. This sounds like she's trying to take care of them

Typically a life estate transfers ownership to another person and the original owner gets to live there until death. It may or may not have been a legal transfer, who knows. But OPs aunt has made a mess. She needs a lawyer.

Technically anyone can have a life estate in a property if the deeds were done properly. I'm still guessing that the aunt was closeted and is taking care of a partner

No, it’s not a partner. I wrote it that way for simplicity, to clarify it’s not a blood relative but it’s a young couple that was distantly related to her husband. We don’t have an issue with them inheriting - but they don’t need the money or the house. They’re young, healthy and have good jobs - and she is very ill. And frankly, I would be willing to help her financially but not to preserve an inheritance for them.

Anonymous wrote:She doesn't have to sell the house but they may put a lien on the house. The 5 year old back may be an issue with the cash.

Wrong.

If the house is a homestead (which is an almost certainty in Florida due to tax advantages) then the following applies:

"Homestead status is determined at the death of the decedent. See Wilson v. Fla. Nat’l Bank & Trust Co., 64 So. 2d 309, 313 (Fla. 1953). “[T]he benefits of homestead protections vest in a qualified beneficiary at the moment of a testator’s death…” Cutler v. Cutler, 994 So. 2d 341, 345 (Fla. 3d DCA 2008).

Therefore, if beneficiaries sell the homestead property after the death of the decedent, because the beneficiaries’ homestead rights attached prior to the sale, “the proceeds of that sale are protected from the claims of the decedent’s creditors.” White v. Theodore Parker, P.A. (in Re Estate of Hamel), 821 So. 2d 1276, 1280 (Fla. 2d DCA 2002) (property rights, including homestead, passing by virtue of the death of a person vest at the time of death)."

Anonymous wrote:Is her friend a girlfriend or boyfriend? The life estate lets them live at the property before they die. This sounds like she's trying to take care of them

Or maybe the aunt has the life estate interest and the property is supposed to transfer to the friend when auntie passes away.

Anonymous wrote:

Anonymous wrote:Is her friend a girlfriend or boyfriend? The life estate lets them live at the property before they die. This sounds like she's trying to take care of them

Typically a life estate transfers ownership to another person and the original owner gets to live there until death. It may or may not have been a legal transfer, who knows. But OPs aunt has made a mess. She needs a lawyer.

Technically anyone can have a life estate in a property if the deeds were done properly. I'm still guessing that the aunt was closeted and is taking care of a partner

She doesn't have to sell the house but they may put a lien on the house. The 5 year old back may be an issue with the cash.

Anonymous wrote:Is her friend a girlfriend or boyfriend? The life estate lets them live at the property before they die. This sounds like she's trying to take care of them

Typically a life estate transfers ownership to another person and the original owner gets to live there until death. It may or may not have been a legal transfer, who knows. But OPs aunt has made a mess. She needs a lawyer.

Is her friend a girlfriend or boyfriend? The life estate lets them live at the property before they die. This sounds like she's trying to take care of them

I think the 50 K she gave away to a friend two years ago will be $50,000 she will need to fund herself before Medicaid will kick in, because it was within the five-year look back period. Rules For Medicaid are state specific. You need to consult a lawyer in Florida. Also, I’m not sure about the life estate with the friend.

Be careful - you should always say she intends to return home. From (one of many) FL Elder Care law firm website:

"If the Medicaid applicant is single, Homestead property is exempt up to the equity value of $636,000.00 in 2022. This figure will be raised by the government over time.

Homestead property can be a single family structure, mobile home, condominium or co-op. A person can only have one Homestead. To be an exempt asset for Medicaid qualification, Homestead property must be located in the State of Florida or in one of 20 states which have a compact (treaty) with the State of Florida.

When applying for Medicaid, the applicant, or his or her representative, must declare an “intent to return home,” at some time in the future, so that Homestead property will be an exempt asset. Although the Department of Children and Families can be lax on requiring this statement, it is the best practice to declare this intention in writing.

The real problem arises when the applicant’s family can no longer afford to pay the taxes, insurance and sometimes mortgage on the Homestead property. While Homestead property is exempt while it is vacant, it loses its exempt status as Homestead property if it is sold or rented. When either of these events occur, further planning on an emergency basis must be initiated to solve this problem.

For example, if the family of a nursing home resident wants to rent the Homestead real property, a special type of deed, known as a ‘Ladybird Deed,” needs to be drafted to protect the property from Medicaid Recovery when the applicant dies. In addition, the Homestead real property must be rented at fair rental value, and all expenses of the property such as taxes, insurance, mortgage payments and management must be proved.

If the family wants to sell the Homestead real property, the proceeds must be immediately invested in non-countable resources.

These decisions regarding Florida Homestead real property require the assistance of an Elder Law Attorney skilled in Homestead real property, taxes, estate and Medicaid planning."

Suggest your aunt contact her attorney and figure out next steps.

My widowed, childless aunt lives in Florida, is hospitalized and is going into rehab place that also has a nursing home. Unless she makes amazing progress, she will either need to get ft help or go to the nursing home. (I actually suspect she will not be released home because every time she is, she ends up back in the hospital.) She has about $120k in the bank and a house worth $350k-$400k. We also found out she gave away $50k two years ago to a family friend and has put her house in "life estate" with that friend. We were thinking we would all chip in if my aunt needed money but we would rather her funds are spent down before the family members chip in.

So if you've had a similar situation, what is the spend-down order for Medicaid in case of nursing home? Once her savings are used up, do they immediately force the sale of the house (there is no one else living there) or how does it work? I have heard about clawback but I assume that would come after the sale of house. She's in such bad health that I don't think she will outlive all of that (savings, house value and clawback) but she is likely to outlive her savings.