My mother in law has a life estate on her house from 2003. The remainders are her 3 children. We all want to sell the house she will be living in an

You have posed an excellent question and one in which the answer has recently changed.  Until this year, there were two different tables used for determining the value of a life estate - Table S - SIngle Life Factor for the IRS and an older table from HCFA for Medicaid.  This year, the law has been changed such that the IRS table is now used for both agencies.  Based on a sale in November 2011, the IRS 7520 interest rate used to calculate a life estate is 1.4%.  A 78 year old woman would have a 12.005% interest in the real property translating into a $42,017.50 interest.  This figure may change in December if the 7520 interest rate for the IRS changes. Whether or not she can protect her interest from Medicaid depends on a number of factors, but it would appear that you may be able to shelter these funds from Medicaid provided that your mother will not need nursing home care within the next 5 years.  A very experienced elder law attorney should be contacted to detail all of the alternatives for you before undertaking any actions. - Alfred Polizzotto III, JD, CFP