can a life estate deed protect property when owner becomes incapacitated?

There are ever changing rules in the area of Elder Law and protection of assets.  Life Estates have been used in the past to provide protection for real property.  This was more common when there was a shorter period of a look back for transfers to individuals and a longer period of look back for trusts.  Now the rules have been modified such that the look back period is 60 months in New York for both transfers to individuals and to trusts. With these look back periods now being identical for trusts and individuals there is no real advantage in most cases to having a life estate rather than setting up a Medicaid Asset Protection Trust to protect those assets.  The trust can be structured to provide an "Stepped Up" basis on death of the individual currently owning the real property, provide for the capital gains exclusion amount if the property is sold, provide for the current owner to remain in the home during their lifetime and provide asset protection for the real property. Additionally, with the current laws in flux over potential recovery against life estates in NY over life estates, there is little reason to create a life estate now as opposed to creating a trust and transferring the property into the trust. A consultation should be had with an Elder Law attorney in your area before undertaking any transaction. - Alfred Polizzotto, III