Dear Michael: We have been farming with my wife's parents for years and years. Back in the 1990's, my wife's dad died and left his half of the estate to a trust. Her mother is still alive and still owns the other half of the land in the estate outright. My wife is to receive this land from the trust and from her mom – via the will – upon her mom's death.

However, now her health is failing because of Alzheimer's or dementia and her costs of care are getting higher and higher. Our dilemma is what we should do, because even though my wife is in fairly good health, I am not in the best of health with diabetes and other ailments, which might mean long-term care for me someday, and we're both in our mid-sixties. We want our son – who has been farming this land for ten years or more- to be able to continue to farm this land and it represents a good chunk of what we farm. What would you suggest? – Half and Half

Dear Half and Half: I understand your problem. Back in the nineties, when we were still dealing with six hundred thousand or a million dollar estate tax exemption – referred to as the Unified Credit – a lot of property when into B or By-pass trusts so the surviving spouse's estate wouldn't be over the Unified Credit upon their second death.

This property was put into the trust with all of the income going to the surviving spouse, but he or she didn't own the property and the trust was irrevocable. The irrevocable part could be a bit of a pain if it wasn't written correctly, but most of them, the assets were just put aside to provide income to the survivor and, in that simplicity, the trust accomplished it's purpose.

However, now with longevity stretching out, it's pretty common for the survivor to live into the eighties and nineties, and their children (because it was common to have all of your kids by the time you were twenty-three or four) are now into the sixties by the time they inherit the property. I've seen cases where the child inheriting was more in risk of long-term care than the parents were. Why? Because with the age of the parents, we knew the stay in the LTC facility wasn't going to be forever but with the children's health the way it was, we could be looking at a ten year or longer need.

In any case, a suggestion in this case might be something like this.

Being as you know where you want your mother-in-law's property to go (to your farming son eventually) you can do what I call a jump-generation life estate with Grandma. She can set up a life estate deed, keeping the income and use for herself first, and then reserving a life estate for you and your wife second, with the 'residual' ownership – or deed – going to your son.

By doing this, we not only protect the property from being attached by Medicaid – if the gift is beyond five years of application to Medicaid – and we also protect it from your own health care issues. You and your wife will never out right own the property yourselves. Upon Grandma's death, her right to receive income and use will pass to you but not the deed.

You two will then receive income for the remainder of your life and – even if you're in a LTC facility or needing LTC care of some sort – won't ever have to worry about losing the farmland due to a Medicaid application. If you never own property outright, you can't lose the deed.

With your mother-in-law, you hope she has enough other assets so that if her health – or mental state – continues to decline (and Alzheimer's and dementia is some of the most expensive care – along with diabetes, MS, or Parkinson's) she will have enough money to get her through the five years.

If not, Medicaid will take the land, value the entire farmland and attribute half of it to her name. They will then either declare her ineligible for benefits for however many months it takes to spend that amount down, or they will place a lien against the property so when it pops out of trust, there will be a lien waiting for it.

This action is the same for married people where one of the spouses is in LTC, and the other spouse is living in the home. Many people believe that Medicaid can't take the home and they're partially right. All Medicaid does is place a lien on the home and waits for the 'community' spouse to die or move out of the home. Then the lien is enforced and if it's for more than the home's value, then bye-bye house.

Think about using the jump-generation life estate and how it might work for you. Also remember to put all the necessary conditions on the deed to your son so this deed is also protected from problems in his life – uncovered liability, divorce, forced sale, etc. to make certain his life doesn't lose the farmland as well. Estate planning has now become a three-generation plan and longevity is really causing some thought and planning.

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