By Sean W. Scott, Esq.
Occasionally, we encounter the issue of determining the value of a Medicaid applicant’s interest in real property when they only own a remainder interest. A remainder interest in a piece of real property is that portion that will go to the person after the life tenant’s interest expires. A life tenant owns the property for their life. When that person dies, the property automatically passes to the remainderman. The remainderman is the person who holds the remainder interest. We only encounter this issue when dealing with life estates, and although it’s uncommon, it does create a challenge. So, how much is that person’s interest in a piece of real property when they’re trying to apply for Medicaid? How much will Medicaid value their interest in that piece of property?
For Florida Medicaid eligibility, the state calculates the value of the remainder interest based on actuarial tables. These tables are from the Social Security Administration (SSA) or the Centers for Medicare & Medicaid Services (CMS).
For an 85-Year-Old Female:
According to the most recent guidance (based on CMS Life Estate and Remainder Interest Tables), the remainderman interest value is calculated using the Section 7520 interest rate and actuarial life expectancy tables.
Let’s break it down in practical terms:
Step-by-Step Estimate:
- Determine the fair market value (FMV) of the entire property.
- Look up the life estate/remainder interest factor for an 85-year-old female using the applicable 7520 rate.
- For example, using a 7520 rate of 5.0% (typical in recent times), the remainder interest factor for an 85-year-old is approximately 0.74212.
- That means the remainder interest is worth 74.212% of the property’s total value.
- Calculation Example:
- If the property’s FMV is $200,000, the value of the remainder interest would be:
$200,000 × 0.74212 = $148,424
Why This Matters for Medicaid:
- Let’s say the Medicaid applicant (the 85-year-old female) transfers the remainderman interest to someone else. Medicaid will consider the value of the transferred interest for divestment or penalty purposes.
- If the applicant retains a life estate, the value of the life estate does not count as a resource. However, the transfer of the remainder interest may count as a gift. That could make it subject to a penalty period if made within the 5-year look-back period.
Important Notes:
- Florida Medicaid adheres to the DCF ESS Policy Manual and SSI-related regulations. While the life estate is a non-countable asset (if retained and the property is the homestead), any gift of a remainder is scrutinized.
- You should always consult an elder law attorney before transferring any interest in property, as timing and method are crucial for eligibility.
Do you need help understanding Medicaid eligibility and rules about asset transfers? The Scott Law Offices can assist with gaining eligibility and asset protection. Reach out now to learn more about our services.
