Legal Question in Wills and Trusts in North Carolina

Anita,

Are you saying that your mother and step-father conveyed the land in their lifetime to their children as tenants in common, reserving a life estate in the land to your mother? If that is the case, then your parents already gave away the land excpt for a life estate.

Since the life tenant (your mother) is still alive, you and your step-sister would only have a remainder interest in the land. I don't know what it is worth. I also don't know why your step-sister is in a nursing home or when this occurred. If she has no money, then it means that she is on Medicaid. Medicaid will thus have a lien on the step-sister's share of the property whenever your mother passes away and you and your step-sister would inherit.

When your step-sister dies, Medicaid could assert the lien at that time. I have no idea what the land will be worth at such time. While it would be cheaper to buy the remainder interest now. the problem is that your step-sister is probably on Medicaid. If that is the case, then she is only allowed to have a certain amount of income/assets. A remainder interest in land would not count for Medicid purposes, but your step-sister could not just do a quit-claim deed to you and give away the land as this will definitely affect her continued eligibility. Further, if you bought out the step-sister's remainder interest now, this might cause her to lose her benefits if she receives too much. Maybe she could set up a self-funded special needs trust with the sale proceeds? That way, she would still be entitled to receive benefits.

Is your step-sister mentally competent? If so, you and she need to speak with an elder law lawyer to ensure that any sale will not mess up her benefits. If that is ok, you can buy out the step-sister's share via a quitclaim deed. If the step-sister is not mentally competent, does she have someone acting as her agent under a valid durable power of attorney or a guardian? If so, then you and the agent/guardian will have to discuss this with the elder law attorney. Again, I think a sale can be accomplished and a self-funded special needs trust set up for her.

You also might be able to subdivide the land into two parcels wtih one-half going to you and one-half to your sister, still preserving the life estate in whatever piece your mother lives on. Everyone would have to agree on this but it should not mess up the step-sister's benefits. In such case, a reasl estate lawyer would have to prepare the deeds and you would have to have a surveyor mark out the boundaries of each parcel. The problem is that 1/2 the land would go to the step-sister and Medicaid would still be able to assert a lien on it.

I hope that your situation will be a lesson to others. Your mother and step-father needed to engage in more thorough estate planning. They could have set up a revocable living trust and put the property in the trust. The trust would then own the land and it would not be an issue if your step-sister was hospitalized.