The Life Estate
Sorry for the generalizations and digressions over the last few weeks, but
home improvements can take away from one’s time and focus. When last we spoke, we were talking
about the inheritance of property, land, homes, and other real estate. As ownership of real property offers
particular and unique benefits and obligations, the gifting of such property
under a Will is something routinely done, but that requires special attention
to determine and accomplish the desires of the gifter in the Estate Plan. It is possible to gift the use of
property to one person, while gifting the ownership of the property to someone
else. The gift of use is called a
Life Estate.
A Life Estate is a gift measured by the life of the
person holding it or by the life of another person. Fancy lawyers call this second Life Estate per autre vie,
life of another. A Life Estate may
be created by a Will. When that is
done, it is generally created upon the death of the testator or the person
making the Will. When a Life
Estate is created, then there is also a remainder interest created, known as
remainder beneficiaries, being who will receive the property upon the death of
the Life Estate holder, or the triggering autre vie.
There are no magic words to create this Life Estate,
but it is frequently left to simple language and basic interpretation. For instance, someone could say in
their Will, “I leave our home to my wife, and upon her death to our children.” The wife will have the home for so long
as she is alive, and then the children get the house. A more controlling or spiteful spouse might say, “ I leave
my house to my wife, for so long as she remains single, and then to my
children”. Sounds weird, but if
you know that the house is owned solely by the husband, and that this was a
second wife, and that the children were from a first marriage, then it begins
to make sense. Frequently, Life
Estates are used to give the family continued use, but then the property would
go to a charity. Consider a gift
such as, “I leave our home to my wife, and upon her death to our Church”. Seems generous, but what about family. If these people have no children or
immediate family, and have an affinity to their church, why not? Finally, there could be tax incentives
in gifting to charity part of one’s estate while leaving other aspects of use
or gift to the family.
Lawful Life Estates are not really recommended
because they are generally inflexible arrangements. The Life Estate holder, is frequently also referred to as a
Life Tenant, because the right to use is essentially the same as someone who is
renting or using a property. One problem can be where the Life Estate
holder and the remainder beneficiaries have different interests. Also, the Life Estate Holder has an
obligation to not damage or waste the property, as they have a duty to
remainder beneficiaries.
Next time we will talk about shared interests in
property and some other complications that can come with Real Estate. After we finish talking about Real
Estate, we will wrap up Wills by talking about giving the family business and
lastly, we will go over residuary gifts. We will also have a specific
discussion about gifts to minors. We will wrap up wills with some other
discussions including charitable gifts. After that, I hope to have
special discussions on taxes. In the meantime, I hope you will review
your Estate Plan with you're “A” Team, or at least begin to seek out an Estate
Planning Attorney to start this process. Stay tuned for future
blogs. However, if you have any questions, feel free to respond below, or
if you are interested in learning more about an Estate Plan, Wills, Trusts,
Advanced Healthcare Directives, or Divorce, Custody, Visitation, Child Support,
Spousal Support, Property Division, Modifications, Remarriage, or Pre-Nuptial
Agreements, please contact me at please contact me at fbegun@gmail.com,
or through my other websites, www.fcbegun.com, or www.linkedin.com
for Fred Begun.
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