A life estate allows for the transfer of real property upon a person’s death. One person, called a life tenant, is given an interest in the property for his or her lifetime. The life tenant has a full right to possess the land or transfer their interest during their lifetime, but must refrain from engaging in waste – activity which would prevent the next person in line from putting the property to full use. At the death of the life tenant, the property passes to another person or entity, called the remainderman.
During the life tenant’s lifetime, she typically assumes financial responsibility for the home; she pays the utilities, real estate taxes, upkeep, repairs, maintenance, insurance, etc. However, some people want the estate to pay for these things; which, if not properly planned, can create serious complications to an estate plan.
For example, did you know that if you create a life estate in your trust, with the provision that the estate pay for the upkeep of the property for the duration of the life estate, that your beneficiaries will not receive their inheritance until the life estate terminates? If you want your estate to pay for the expenses of the property, you should specify a maximum dollar limit that the estate will pay. If you do not do this, your trust must remain funded for the duration of the life estate to ensure all expenses will be paid, leaving your beneficiaries empty handed until the life estate terminates.
This is just one example of how a life estate can adversely affect your estate if not properly planned. If you have questions about whether a life estate is right for you, the attorneys at Morris Hall are ready to assist you.
Contributed by MH Phoenix Estate Planning Attorney, Darren Richardson.
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You have a number of options when it comes to estate planning, so why pick Morris Hall? First off, estate planning and asset protection are a very complicated endeavor and you should only trust someone who focuses exclusively on those matters. Also, MH is a proud member of The American Academy of Estate Planning Attorneys (AAEPA) which provides us additional support, advanced training, tools and information that is not available to others – which means that we can better protect your assets and your loved ones. We are one of only two firms in Arizona that belong to the AAEPA and are the only firm in that has been granted membership. If you have assets and loved ones that you want to protect, you are in good hands with MH. Contact us today at 888.222.1328 to schedule an appointment!
This blog should be used for informational purposes only. It does not create an attorney-client relationship with any reader and should not be construed as legal advice. If you need legal advice, please contact an attorney in your community who can assess the specifics of your situation.
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