How does a ‘life estate’ factor into estate planning?
The family home is where the heart is, but what will happen to your home when you die? Some people in Ft. Myers may have left their home to their children in their will, but that will still needs to go through probate, which could be a long and pricey process. Are there any other options for people who want to hand their home down to their heirs but want to avoid the probate process?
One way to pass down your home is by setting up a life estate. The homeowner, also called the life tenant, will remain in the house until he or she dies. At that point, the house automatically passes on to the homeowner’s heirs, also called the remaindermen.
In general, the homeowner will execute a deed to the house stating that the homeowner is the grantor and his or her heirs are the grantees. The deed states that the homeowner will keep living in the home. The deed will then be filed with the Registry of Deeds in the county where the homeowner lives.
When a person is a life tenant, they are still responsible for the property. Not only must the life tenant maintain the home, but he or she needs to keep up with the mortgage payments, if there are any, pay property taxes and have a current homeowner’s insurance policy. That being said, there is nothing saying that these costs can’t be taken on by the life tenant’s remaindermen, if they agree to.
Keep in mind that once a life tenant assigns remaindermen to his or her home, they cannot be taken off the deed unless they agree to do so. Moreover, the life tenant is not free to put the home up for sale unless the remaindermen agree to do so. In addition, whether the deed lists the remaindermen as either joint tenants or tenants in common can have an effect on how the remainderman’s share in the house will be handled if that remainderman dies.
This is only a very general overview of life estates; in actuality they can be quite complex. Therefore, those who are interested in creating a life estate, rather than creating a will or a trust may want to consult with an estate planning attorney, who can advise the homeowner on their options so they can make informed decisions.
Source: The Huffington Post, “An Overlooked Estate Planning Tool If You Don’t Have a Trust: The Life Estate,” Bradford Pine, April 5, 2017