Lawmakers want life estate law change
Changes made in 2003 called unfair
By Janet Kubat Willette
For years Minnesotans have put their property in life estates to pass the property to their children.
A life estate allows people to deed property to their heirs upon their death while retaining the right to reside in or draw income from the property while alive, said Bob Ebbesen, an attorney in Redwood Falls and Lamberton since 1952.
The life estate holder is responsible for paying taxes on the property.
Prior to Aug. 1, 2003, when the owner of a life estate died their life estate came to an end, said Joe Rubenstein, staff attorney with the special recovery unit at the Department of Human Services. The government was obligated to release any liens without making any recovery, Rubenstein said.
The 2003 change keeps the life estate going after the owner dies. The lien remains in place after the people who own the life estate die, and it remains in place for 10 years after the date it's filed. The department has the option of renewing the lien for another 10 years, an authority it has never used, Rubenstein said.
As a practical matter, the state doesn't collect if the property isn't sold, he said. The state has never forced anyone to sell or mortgage property in order to make a recovery for medical assistance costs.
It's worth noting that there are situations in which farmers or other owners of property have existing loans or who want to leverage the life estate for an operating loan or to make property improvements, Rubenstein said.
In those cases, the state is willing to take a second position to the lending institution.
The Department of Human Services has the authority to negotiate and settle liens, Rubenstein said, and will entertain any offer that surviving heirs want to make. The department wants to settle with the heirs on fair terms, he said. A person from the department won't show up on a heir's doorstep and demand to be paid a set amount.
If some lawmakers have their way, the law change will be reversed.
Art Mans and his son, Tim, testified in February in support of changing the law.
Art and his wife, Eileen, of Hinckley, set up a life estate about three years ago to pass the farm to their five children.
"We've all worked hard for this land, we want it to stay in the family," Art Mans said.
Rep. Mary Ellen Otremba, DFL-Long Prairie, has heard from many families who set up a life estate and who now fear they will lose the family farm. Otremba is carrying a bill to reverse the changes made in 2003.
The change hurts farmers, small business people and young people who have to take help, she said.
"The truly amazing thing is that this law hardly recovers anything for the state," Otremba said. "It nets the state between $300,000 to $400,000 a year -- a drop in the bucket of the state budget. Yet for some families who played by the rules, it can be disastrous.
"My advice to everybody right now is when the lien does go on your property, appeal immediately because you did it legally, and it really shouldn't be there."
Ebbesen says the law hurts the middle class.
"It's a hell of a poor law," he said. "Some claim rich people are getting rid of their property so they don't have to pay. Rich people pay their own way. It's not the rich people. They've got the money. It's the middle people. The poor people don't have any money."
For more information on liens and life estates, telephone your county social services department, or contact Joe Rubenstein at the Department of Human Services. He can be reached at (651) 297-1104 or (800) 657-3963 ext. 71104.
BOX; For more information on liens and life estates, telephone your county social services department.
Or contact Joe Rubenstein at the Department of Human Services. He can be reached at (651) 297-1104 or (800) 657-3963 ext. 71104.
BOX; Life estate bills
m SF1699 (Lourey) removes liens against life estates and joint tenant interests.
m HF2172 (Otremba) is the companion bill in the House. The Senate bill is in the finance committee and may be included in the human services finance bill.
m HF2525 (Lanning) was referred to the House Judiciary Policy and Finance Committee on March 15.
The bill modifies the effective date for laws enacted in 2003 that continue a person's life estate or joint tenancy interests after the person's death to recover medical assistance costs.
The bill changes the effective date to apply only to life estates and joint tenancies established on or after Aug. 1, 2003.
The human services commissioner is directed to return any money recovered since the law took effect last year.
m Sen. Sheila Kiscaden, I-Rochester, is carrying the companion legislation in the Senate. Her bill, SF2667, is in the health and family security committee.