confused over life estate.

[njhouse]

What is the name of your state? New Jersey

What is the name of your state? NEW JERSEY

My Dad passed the title of his house over to me 15 years ago as a life estate, when I moved in with him 15 years ago, he needed help with finances and the support of the house and repairs. I have maintained and improved the house since. With my dad getting on in years and possible need of knee replacement surgury, I don't know if medicare will cover everything, My dad has no savings or any other assests. and Im worried that we will be wiped out finanically.
Im thinking of getting supplemental insurance for him through aarp.

My questions: Can the house be taken away from us if my dad has a catastrophic long illness?

can a life estate be considered my fathers assets and creditors can put a lein on the house.

should I put a hold on spending $9,000 of my money in repairs on the house? I am so confused, It seems so complicated. any answers would be greatly appreciated.

 

[lwpat]

The house still belongs to your father. If you are going to do major repairs, have him sign a note and mortgage and record them. What you have is the right to live in the house until you die. At that time title will pass to his heirs or creditors.

 

[divgradcurl]

What is the name of your state? New Jersey

What is the name of your state? NEW JERSEY

My Dad passed the title of his house over to me 15 years ago as a life estate, when I moved in with him 15 years ago, he needed help with finances and the support of the house and repairs. I have maintained and improved the house since. With my dad getting on in years and possible need of knee replacement surgury, I don't know if medicare will cover everything, My dad has no savings or any other assests. and Im worried that we will be wiped out finanically.
Im thinking of getting supplemental insurance for him through aarp.

My questions: Can the house be taken away from us if my dad has a catastrophic long illness?

can a life estate be considered my fathers assets and creditors can put a lein on the house.

should I put a hold on spending $9,000 of my money in repairs on the house? I am so confused, It seems so complicated. any answers would be greatly appreciated.

Who holds the "remainder" in the house -- that is, who gets the house once you die? What does the deed actually say?

 

[njhouse]

My dad is the grantor and I'm the remainderman.

The deed says
This deed made on date
Between father (grantor)
Address
And son (grantee)
Same address
Transfer of ownership for sum
Property description---- and last sentence says
The grantor reserves unto himself a life estate in the within described premises

 

[divgradcurl]

Okay -- now things make more sense. So YOU own the house, your Dad is the life tenant. Got it.

If the house was transferred 15 years ago, you have nothing to worry about with regards to Medicare. The new rules I believe have a 5-year "lookback" to see if the person gave away or otherwise disposed of assets to avoid having to give up those assets to the government -- so you should be fine.

As a life tenant, all your Dad owns now is a right to exclusively inhabit the house while he is still alive. He cannot sell the house, or transfer ownership of the house, because he is no longer the owner -- he is the life tenant. If Medicare comes for reimbursement, they can only go after what your father actually owns -- and all he owns is a life estate, and once he dies, even that is gone.

My questions: Can the house be taken away from us if my dad has a catastrophic long illness?

Not via Medicare. I guess if you personally run up debts to support your dad, that's one thing -- but that won't directly implicate the house.

can a life estate be considered my fathers assets and creditors can put a lein on the house.

A life estate is an asset -- but it is one that disappears when your father dies, so any liens against that "asset" will also disappear. Now, if creditors had liens on the house BEFORE the transfer, they probably are still there, and will need to be cleared at some point. But any debt your father runs up AFTER transferring the house generally cannot be put against the house itself. Now, if there was fraud involved (either knowing or unknowing) and your father, even after trasnferring the house, used the house itself as collateral for a loan (a home equity loan or a mortgage), then it is possible that a court would allow the lien to remain on the home, even though legally the only thing your dad "owns" is a life estate, and so the only thing he can "encumber" is the life estate. He technically can't "encumber" the underlying "remainder." You can, though.

should I put a hold on spending $9,000 of my money in repairs on the house? I am so confused, It seems so complicated. any answers would be greatly appreciated.

Based solely on what you've written, there probably isn't any reason to not put the money into the house -- it's YOUR house. Now, you don't have the right to use the house, or to live in the house, while the life tenant is still alive (although your Dad can certainly grant you access and allow you to live there), but you still own the underlying house, so it makes sense to keep it up. Technically, the life tenant has the reponsibility for keeping up the house, but in this case, it sounds like you will be doing the work and making the investments in any event, so that's just a technicality.

If you want to be sure, go and talk with a local attorney, who can review all of the relevant paperwork and advise you accordingly. But based SOLELY on what you've written here, it doesn't sound like you have much to worry about with respect to losing the house.

EDIT: The one other lien that could be established is a mechanic's lien for work done by a licensed contractor on the house, even if your dad was the one who authorized the work, the mechanic's lien would go against the house itself, since the remainderman is a beneficiary of the work.

 

[njhouse]

Thanks for the reply. first there is no debt or liens on the house. I went to two elder care lawyers-- both confused me over all the rules of a life estate. one said my dad never filed a gift tax return 15 years ago and will have to do so now.. the other said Im not really suppose to be living in the house and doing repairs it goes against the rules. I can be evicted if my dad wants althought he assured me he would never do that. they both said its useless to get supplemental health care insurance for my dad I would not be able to afford it. I don't know both lawyers said some stuff that worried me. but my question to the forum is what is a gift tax return? is it really necessary?

 

[anteater]

..... but my question to the forum is what is a gift tax return? is it really necessary?

Whenever one person makes gifts to another person in one year that exceed a certain amount, currently $12,000, the person making the gifts is supposed to file a gift tax return. Form 709 - http://www.irs.gov/pub/irs-pdf/f709.pdf Since you did not pay fair market value for the house, yiour father made a gift to you. And it most likely was a gift with a value greater than the annual exclusion 15 years ago, which was probably $9,000 or $10,000.

Having to file a gift tax return rarely means that there is any actual tax to be paid since each person has a lifetime $1,000,000 credit to be used. Using the gift tax credit simply reduces the amount of estate tax credit avaialble. The idea is to not allow people to give away gazillions in gifts to avoid eventually having to pay estate taxes.

If this transaction happened 15 years ago, I would be inclined to apply the "Let Sleeping Dogs Lie" doctrine. Especially since it appears that your father will not have much of an estate. Shoot, if not filing a gift tax return when one should be filed were a criminal offense and the IRS went searching for non-filers, we would need a prison on every block.

 

[lwpat]

My Dad passed the title of his house over to me 15 years ago as a life estate

Sorry. I did not fully understand the situation. I ditto the other posts.