What Are My Rights of Having a Life Estate in Property?
Provided by HG.org
It is important to understand what a life estate is with property and how it affects a person. With this, the rights of an individual applied to these situations must be fully comprehended so that mistakes are not made. A life estate is usually property that has been acquired during the lifetime of a person with his or her ownership only lasting through the time he or she lives.
This means the ownership has an indefinite amount of time in possession. This is usually real estate, but it may be other items as well. Those with these life estates are life tenants. In general situations, these properties may be passed on to others, but the life tenant is able to live, eat, sleep and complete actions within the land or house even if the ownership will become someone else’s upon his or her death. The transfer frequently occurs with a sale or giving the property to another.
The new owner, or remainderman, has an interest in the house or land, but he or she has no right of occupying the property. This also means he or she cannot sell it, rent it or alter it until the life tenant passes on or leaves permanently. Full control remains with the current owner except selling or obtaining a mortgage. However, this life tenant is permitted to rent it out, use it as he or she sees fit, and improvements may be made as well as alterations. This does require him or her to maintain the property, but selling the home or acquiring a mortgage would mean that the remainderman would have to provide consent and sign any necessary papers. This also means that if a sale does occur, the amount is split with the remainderman, and he or she is allocated a larger amount based on the age of the life tenant.
Why a Life Estate?
One of the most important reasons to initiate a life estate process is to avoid probate court and processes. These often take at least six months, and if there are any challenges, inherited estates may take years to obtain properly. When the title is only in the name of the deceased at the time he or she dies, it must go through probate in the event of a last will or testament. However, there are other legal documents and methods that may bypass this such as a trust. It may be advisable to hold the property in multiple names with rights of survivorship or with spouses that are tenants by the entirety. Similar procedures could be beneficial as well.
There are benefits of taxation provided the value of the property does not increase after the death of the previous owner after the real estate is inherited. This then ensures capital gains are avoided unless the value increases. The estate may be used to protect the owner or others for possible long-term care. It may be preserved to plan for the future. However, this may cause a five-year transfer until the protection is in place. IN some instances, this may lead to a lien on the property, but this is usually only for the value of the life estate and not the whole value of the real estate property.
Life Estate Responsibilities
The life tenant of a life estate still has the usual responsibilities as if he or she were still the owner such as paying mortgages, paying all applicable property taxes, keeping insurance and repairing issues on the house or land. The life tenant must also ensure there are not issues with the documentation about the estate going through a life estate transaction. This may then lead to the person hiring a real estate lawyer to ensure the processes are legal, the contracts are clear and all other procedures are followed as necessary. The legal professional may also work with or for the life tenant behind the scenes or find other professionals to assist such as an accountant or tax preparer.
Other Issues with a Life Estate
Because the life tenant is no longer the only person attached to the estate, this means that selling the property must be approved by all involved. The remainderman must agree to these processes and sign off on selling or when major changes are needed. However, it is essential to contact a lawyer before these methods are used to ensure everything is processed and filed correctly. Removing persons from these situations may become tricky, and it is important to ensure all parties included in these arrangements may be trusted and helpful.
Disclaimer: While every effort has been made to ensure the accuracy of this publication, it is not intended to provide legal advice as individual situations will differ and should be discussed with an expert and/or lawyer.