Actor Robin Williams passed away in August 2014. Prior to his passing, he established a trust that gave the majority of his estate to his three children. The trust also directed that one of his homes go to his wife for the remainder of her lifetime. This type of transfer is called a life estate.
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 property and may even be able to transfer that interest during their lifetime. At the life tenant’s death, the property passes to another person or entity, called the remainderman.
The life tenant typically assumes financial responsibility for the home, including the payment of utilities, real estate taxes, upkeep, repairs, maintenance and insurance for the duration of the life estate. Some folks, like Robin Williams, want the estate to pay for these things – which, if not properly planned, can create serious complications with the estate administration.
Mr. Williams’ trust directed that his wife receive “enough money” to maintain the home over the duration of her lifetime. Since a dollar amount wasn’t specified, Mr. Williams’ three children are unable to collect their share of the inheritance because the amount of money needed to maintain the residence for the duration of Mr. Williams’ widow’s life is uncertain. Mr. Williams’ family is presently in mediation to determine a specific amount to maintain the property for over his wife’s lifetime. If a solution cannot be determined in mediation, the matter may end up in court.
This is just one example of how a seemingly minor detail can adversely affect your estate plan if not properly drafted. If you have questions or concerns regarding your estate plan, contact our office for a free consultation.
Contributed by Morris Hall, PLLC Phoenix Estate Planning Attorney, Darren L. Richardson.
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