An individual who owns a life estate in a piece of property (often a home) has the right to live on the property for the rest of their life. Someone in this position is referred to as a "life tenant" since they own joint property ownership with another person.

The property will pass to the remainderman upon the life tenant's death. In the United States, life estates are commonly created to bypass probate and guarantee that the following generation will inherit the family house.

Understanding a Life Estate

A remainderman share ownership of a property. The remainderman is interested in the property but cannot take possession until the life tenant dies, as the name implies.

The life tenant has the right to occupy the property for as long as they wish but cannot transfer ownership or obtain a mortgage on the property without the remainderman's permission.

For properties held under a life estate, the life estate deed is the legal instrument that allows the owner to transfer title to a successor without putting the property in the decedent's will.

Earnings Potential From a Life Insurance Policy

The primary reason for establishing a life estate is to facilitate the transfer of property ownership to the next generation. Still, it can also be utilized to produce a source of income. Instead of a one-time windfall, a life estate can be established to guarantee a person a steady income for the rest of their lives.

Money from the estate is invested in bonds, oil and gas leases, real estate investment trusts (REITs), and other similar income-generating ventures.

Establishing a Lasting Estate

A life estate may be established in just a few easy steps after determining it's necessary.

Seek legal advice

Consultation with a local attorney specializing in estate law can help you make a well-informed decision.

The Life Estate Deed

Though it's feasible to prepare the deed on your own, it's recommended that you have legal counsel handle it to ensure that there are no omissions or mistakes.

Record Life Estate Deed

To get a deed recorded, you must visit your local county clerk's office. Submission to the county clerk is required for the legal effect.

Other Options Besides a Life Estate

There are other ways to ensure that your assets go to your heirs without going through a drawn-out probate process, but a life estate is a helpful tool. In addition, you may make a:

Transfer-on-Death-Deed:

After your death, your heirs can take possession of the property stated in this deed. This deed provides a versatile option for a life estate since it can be altered anytime.

The Revocable Trust:

You put them in a trust to shield them from lawsuits and the court's probate process. It's another versatile option for a life estate; you can revoke or modify it as needed.

Medicaid and Lifetime Assets

Medicaid is a state-run insurance program for the elderly and disabled that guarantees they will receive the care they need if they require a transition to a nursing home. Owning more than your state allows will exclude you from Medicaid eligibility unless one of the exceptions listed below applies.

Because of how important it is to recipients, Medicaid often attempts to take possession of their primary residence. To recover the money spent on your long-term care, it may, for instance, put a lien on your home or try to sell it.

Different Kinds of Life Estates

The two forms of life estates are the "conventional" and "enhanced" forms. Many people believe that the term "Lady Bird deed" was coined after former President Lyndon B. Johnson's death when he bequeathed his estate to his wife, Lady Bird Johnson. This custom, however, predates even that.

Unlike the standard form, the enhanced form allows the life tenant to sell the property or take out a mortgage without the remainderman's permission and can be canceled at any time.

The Pros and Cons of Life Estates

The benefits and drawbacks of life estates are equally important considerations. The ease with which a residence may be passed down the generations is the life estate's greatest strength.

The probate procedure might slow the transfer of ownership if the place is mentioned in the homeowner's will. When a death certificate is submitted, the life estate automatically transfers to the next of kin.

The Conclusion

Homeowners may be confident that their house will be transferred to their chosen heir with little legal hassle and delay by establishing a life estate. A life estate should only be created if both parties are aware of the permanence of the arrangement and are OK with the risks involved.