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Protecting Your Home from Estate Recovery in Washington State: Understanding Life Estates

What is Estate Recovery in Washington State?

After a Medicaid recipient passes away, Washington State engages in estate recovery, seeking to recoup the benefits it paid for the recipient's care from their estate. For most Medicaid recipients, their primary asset is their home. To safeguard your home's value, it's crucial to explore effective strategies like setting up a "life estate."

Introducing Life Estates: A Powerful Asset Protection Tool

A life estate is a form of joint ownership of property between two or more individuals, allowing each party to have ownership interest for distinct periods of time. The person holding the life estate has the right to possess and utilize the property during their lifetime, while the remainder interest holder gains ownership rights only after the life estate holder's passing.

Example: How Life Estates Work

Let's understand this concept with an example: Jane decides to grant a remainder interest in her house to her children, Jim and Jill, while retaining a life interest for herself. Through a simple deed, Jane becomes the life estate holder, retaining the right to live in the property or collect rents from it. However, she also bears responsibility for the property's maintenance and taxes. Additionally, the property cannot be sold to a third party without the cooperation of Jim and Jill, the remainder interest holders.

Advantages and Disadvantages of Life Estates in Washington State


  1. Avoiding Probate: Upon the life estate holder's death, the property automatically transfers to the remainder interest holders, bypassing probate.

  2. Capital Gains Tax Reduction: Remainder interest holders can benefit from a "step up" in the property's basis, leading to a significant reduction in capital gains tax when they eventually sell the property.


  1. Estate Taxation: Depending on the estate's size and the state's estate tax threshold, the property may be subject to estate taxation upon the life estate holder's death.

  2. Medicaid Ineligibility Period: Transferring the deed to children while retaining a life estate can trigger a Medicaid ineligibility period of up to five years, impacting potential benefits.

  3. Transfer Penalty: Purchasing a life estate in another property may result in a transfer penalty unless the individual resides in the property for at least one year after the purchase and pays a fair amount for the life estate.

Creating Life Estates in Washington State

Life estates are established through a straightforward process of executing a deed that conveys the remainder interest to another while retaining a life interest. A notable advantage is that, in many cases, once the house passes to the remainder beneficiaries, the state cannot recover Medicaid expenses incurred by the life estate holder.

Conclusion: Safeguard Your Home with Life Estates in Washington State

By understanding and utilizing life estates in Washington State, you can protect your home from estate recovery, ensure a smoother transfer of ownership to your beneficiaries, and potentially enjoy tax benefits. However, it's essential to weigh the advantages and disadvantages carefully and seek professional advice to make informed decisions tailored to your specific circumstances.

An irrevocable trust is a more complex option with similar benefits. As always, speak to an attorney first about life estates.


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