Renting a Life Estate Property

[Barry Cooley]

Good afternoon BP members. I have a situation that I hope you will be able to help me with. 

My mother has been in a nursing home for over four years. During this time, her home has sat vacant. The property is in a life-estate in Alabama. Myself and my siblings are the heirs. We are considering putting a tenant in the home, but we are not sure of the tax consequences and the effect on Medicaid. Would the nursing home get the proceeds from rent? Would they know? If that is the case, in my opinion, that is still better than the house sitting vacant for any longer and deteriorating.

What would the tax consequences be? There are four siblings, including myself. Would rent be reported as income? If so, would we report it equally? Or, since the home belongs to her until her death, would rent need to be reported? I'm not trying to avoid taxes, I just don't know how this would work.

I'm sure I will have more questions, but thanks in advance for any input.