Life Estate As An Estate Planning Tool
Planning for the distribution of assets after death is often about making plans to take care of other people. This may mean balancing the needs of various beneficiaries and making plans that may grant gifts to multiple beneficiaries at different times. For example, imagine a testator wants to leave his home to his long-term girlfriend, but also wants his children to own the same home in the future. The testator wants to protect his girlfriend and allow her to continue living in the home after his death, but also wants to ensure that his own children eventually get ownership of the home. One of the best ways for the testator to accomplish this kind of gift is through the use of a life estate.
A life estate refers to a form of ownership in real estate that allows a person to have an ownership interest in the real estate for a period of time before full ownership rights are passed on to another person. The period of time can be measured by the life of the person who holds the life estate, or by the life of a third party. For instance, a person can hold a life estate in a piece of land for his lifetime, when the person dies, the land will be passed on to another person to own fully. Alternatively, the person holding the life estate can hold it for the duration of another person’s life, and when that person dies, the life estate holder loses ownership interest.
The person who gains ownership interest at the end of a life estate is referred to as a remainderman. The remainderman has limited interests in the property during the lifetime of the life estate holder but does have a right to ensure that the life estate holder is not taking actions that could negatively affect his interests. The life estate holder is required to make any necessary insurance payments and pay all taxes during his life estate.
The life estate holder cannot sell the property as a whole. The only thing he can transfer to another person is his life estate interest. So, if a buyer purchased the interest of the life estate holder, the buyer’s interest would be measured by the life of the original life estate holder, and then the property would pass to the remainderman.
Use of a life estate can also have other benefits. When the life estate ends, the property is passed on to the remainderman without going through probate. This is one reason that a parent may choose to take a life estate in property and make her children remaindermen. This would save the children the trouble of going through the probate process. In addition, a person may grant himself life estate in property and name another person as a remainderman in order to avoid Medicaid estate recovery since the life estate would be non-probate property.
Contact Us for Legal Assistance
For more information on life estates and how you can grant property interests to the same property to multiple beneficiaries, contact a knowledgeable estate planning attorney at Meyer & Spencer, P.C., with offices in Pleasantville and Mahopac, New York, and serving Westchester and Putnam Counties.