THE REVERE ADVOCATE – FRIDAY, MAY 6, 2022 Page 17 Seniors grooved on the dance fl oor. MASSHEALTH’S CALCULATION OF VALUE OF LIFE ESTATES M assHealth issued Eligibility Operations Memo Geri Damiano, second from right, danced around the room during last Tuesday’s Garden Party at the Rossetti-Cowan Senior Center. 19-12, “Calculating the value of a life estate and remainder interest” on August 15, 2019. Eff ective September 3, 2019, MassHealth no longer uses the IRS Table S interest rates (found in Book Aleph) along with interest rates published by the IRS pursuant to Internal Revenue Code Section 7520 when calculating the value of a life estate and remainder interest in real estate. MassHealth is now using Wildlife Control and Tree Service 24-Hour Service the Social Security Operations Manual (POMS) SI 01140.120 Life Estate and Remainder Interest Table. The result of this is that the value of a life estate interest as calculated by MassHealth is much higher than it otherwise would be under the old valuation method. Therefore, if a parent had deeded his or her home to the children many years ago with a reserved life estate and now wishes to sell the home, the amount of the net sales proceeds that will belong to the parent is a lot higher than it otherwise would be. Once the home is sold and the parent is now credited with the portion attributed to the life estate interest, those monies will then be considered countable assets when applying for MassHealth. If the parent immediately transfers those monies to his or her children, a new fi ve year look back period would commence as of the date of the transfer. As a result, much more money is at stake if the parent were to go into a nursing home prior to the expiration of that fi veyear period. If the real estate is a vacation home, if MassHealth utilizes the new tables for valuing the life estate in the vacation home, the parent may very well be over the asset limit due to the higher valuation. Using the old IRS Table S along with the Internal Revenue Code Section 7520 interest rates would result in much less exposure as far as countable assets are concerned. One option would be to rent out the vacation home at a profi t and take the position that the vacation home is necessary for self-support. In this case, the vacation home would not be considered a countable asset. The net income from the vacation home would have to be paid to the nursing home as part of the patient pay amount, but MassHealth would pay the bulk of the monthly nursing home cost if the application is otherwise approved. If the real estate in question is your principal residence and it is sold, under the MassHealth new calculation methodology, more of the gain will be allocated to the life tenant resulting in less or no capital gains tax due to the $250,000 capital gains tax exclusion (if single) or $500,000 (if married). If the children do not live in the home, they would not be able to take advantage of the capital gains tax exclusion. In that situation, having less of the sales proceeds attributed to the remaindermen (i.e. children) would end up saving them in taxes. The irrevocable trusts offers the best approach to protecting assets and assuring favorable tax results now that court cases have been decided against MassHealth in support of the use of these trusts as an estate planning/Medicaid planning strategy. Joseph D. Cataldo is an Estate Planning/Elder Law Attorney, Certifi ed Public Accountant, Certifi ed Financial Planner, AICPA Personal Financial Specialist and holds a Master’s Degree in Taxation. Fully Insured 781-269-0914 Like us on Facebook advocate newspaper Facebook.com/Advocate.news.ma
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