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Avoiding probate and having an asset (such as a house or piece of real estate property) transferred directly to a loved one is a popular estate planning goal. For that reason, many consider the option of owning property through a life estate. Learn about how life estates work and how an attorney can help you decide whether a life estate is right for you.
What Is A Life Estate?
A life estate is a type of ownership arrangement that allows a current owner (called a life tenant) and a future owner (named a remainderman) to share ownership of the same property. This arrangement can be between a husband and wife, a parent and children, or a third party.
For example, suppose a father owns a vacation cabin as a part of a life estate. In that case, he is entitled to occupying and enjoying ownership rights of that cabin until he passes away. When that happens, his children may then enjoy full ownership status.
Who Owns The Property In A Life Estate?
The life tenant retains all property ownership rights during their lifetime and the responsibilities that come with owning a piece of real estate. The life tenant gets to possess, use, rent and access the property without restrictions during their lifetime.
If the property generates any profits, the life tenant is entitled to them and is also responsible for any debts or upkeep costs associated with the property. Once the life tenant passes away, all ownership rights and responsibilities are directly transferred to the remainderman.
What Happens If The Tenant Wants To Sell The Property?
Even though the life tenant gets complete control and possession of the property during their lifetime, they are not allowed to sell or otherwise dispose of the property without the acknowledgment or consent of the remainderman. In order to sell, mortgage, or otherwise transfer the property, both parties must be in agreement. However, either party may sell or transfer their share of ownership in the property to someone else.
Do I Need An Attorney To Create A Life Estate?
A life estate is one of many estate planning strategies that can help simplify the asset distribution process after one passes away. As in every estate planning technique, there are advantages and disadvantages to owning property in a life estate arrangement. It is recommended to seek the help of an attorney to discuss whether a life estate is right for you.