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Aged, Blind and Disabled Manual Policy Manual Number: 110.050 Section: Financial Eligibility Requirements Chapter: ABD Countable and Excluded Resources
September 1, 2026 Division of TennCare 27 4. Purchase of a Life Estate under Transfer of Asset Rules
When an individual purchases or receives as compensation in a transaction a life estate in another individual’s home, the purchase of the life estate is considered an asset transfer subject to penalty, unless the individual then lives in the home for a period of at least one year after receiving the life estate.
If the individual does live in the home for a period of one year after receiving or purchasing the life estate, the amount of the transfer is the entire amount used to purchase the life estate.
If an individual purchases a life estate in another individual’s home and then does live there for one year after the purchase, the life estate is an excluded resource while being used as the individual’s (or the individual’s spouse’s home). However, if payment for a life estate exceeds the FMV of the life estate as calculated below, the difference between the amount paid and the FMV should be treated as an asset transfer. In addition, if an individual makes a gift or transfer of a life estate interest, the value of the life estate should be treated as a transfer of assets.
a. Calculation: See the “Life Estate Interest Table” See Life Estate Interest Table.
• Multiply the FMV of the property by the life estate factor that corresponds to the age of the individual at the time the life estate was established. The result is the life estate value at the time of the asset transfer.
• Determine the amount of the uncompensated asset transfer by subtracting the life estate value from the FMV.
• Use the uncompensated asset transfer value to determine the asset transfer penalty period.
b. Example
Mrs. Jones, age 70, owns a house with a small farm attached to it, worth $100,000 in total. She deeds the house and farm to her son but retains a life estate in the property.