How Does a Life Estate Affect New Jersey Medicaid?

For New Jersey Medicaid purposes, a transaction involving a life estate is considered a transfer of assets, but only insofar as the remainder interest is concerned.  A Medicaid penalty is assessed on the part that was transferred.  If Mom transfers her home to her children but keeps the life estate the penalty is calculated on the remainder interest, that part that was transferred to the children.   The part Mom still owns is an exempt asset if she continues to live in it.  However, if the home is sold she is entitled to a portion of the sale proceeds equal to the value of her life estate and that is a countable asset for New Jersey Medicaid purposes.