PM 07-02-14

When an asset transfer occurs which involves a life estate, determine whether the LTC/SLF resident or Medical client applying for or receiving DoA services received fair market value. If fair market value is not received, take the following steps to determine the amount transferred for less than fair market value:

  1. Determine the equity value of the transferred asset.
  2. Determine the value of the life estate.

    To determine the value of the life estate, refer to the Life Estate Table (see WAG 25-03-11). Calculate the value of the life estate by multiplying the equity value of the asset by the amount in the column titled Life Estate that corresponds to the client's age at the time of the transfer. 

  3. Determine the amount transferred for less than fair market value.

For transfers establishing a life estate in which no compensation is received, the difference between the equity value and the value of the life estate is the amount the client transferred for less than fair market value. Deduct any amount the client actually receives from this difference.

For transfers of the client's life estate, the value of the life estate is the amount, if received, that would be treated as a transfer for fair market value. The difference between the value of the life estate and the amount the client receives is the amount the client transferred for less than fair market value.

Example 1: Mr. A, age 65, owns a house with an equity value of $100,000. He is a resident of an LTC facility. Mr. A transfers the home to his son but retains a life estate in the property. He received nothing in return for the transfer.

To determine the value of the life estate, multiply the equity value of the property ($100,000) by the life estate factor corresponding to Mr. A's age in the Life Estate Table (.67970). The value of Mr. A's life estate is $67,970 ($100,000 X .67970 = $67,970). Since the equity value ($100,000) is greater than the life estate value ($67,970), the Family Community Resource Center determines that the transfer was made for less than fair market value. The amount transferred for less than fair market value is the difference between the equity value and the life estate value ($100,000 - $67,970 = $32,030).

The Family Community Resource Center must apply the asset transfer policy to this transfer. If it is determined that the client is subject to a penalty period for LTC, SLF, and DoA services, the penalty is based on $32,030 of assets transferred for less than fair market value.

Example 2: Ms. B, age 75, transferred a home to her children 10 years ago but retained a life estate in the property. She receives DoA services. The Family Community Resource Center is notified that the home was just sold and net proceeds equal $85,000. Ms. B received nothing from the sale of the property.

To determine the value of the life estate, multiply the equity value of the property ($85,000) by the life estate factor corresponding to Ms. B's age (at the time of the sale) in the Life Estate Table (.52149). The value of Ms. B's life estate is $44,326 ($85,000 X .52149). Since the life estate value ($44,326) is greater than the amount received ($0), the Family Community Resource Center determines that the transfer was made for less than fair market value. The amount transferred for less than fair market value is the difference between the life estate value and the amount received ($44,326 - 0 = $44,326).

The Family Community Resource Center must apply the asset transfer policy to the sale. If it is determined that the client is subject to a penalty period for LTC, SLF, and DoA services, the penalty is based on $44,326 of assets transferred for less than fair market value.