#lifeestate

[ratlifflaw]

Life estates...a great tool for estate planning and more.  A "Life Estate" in real estate is the division of present use from future use by someone the grantor wants to have the property at the grantor's death.  Life estates also prevent real estate from going through the probate process at death of the grantor and helps with Medicaid eligibility if necessary.

An owner can deed property to someone - such as a child - and retain a "life estate" in the conveyance.  In doing so, the property remains in the possession and control of the owner, but upon the owner's death automatically vests in the remainderman (the person the property was deeded to).  The life estate holder controls the property completely - excepting only that any sale or mortgage must be agreed to by the remainderman.  This approach also reduces the residual value for Medicaid eligibility calculation purposes as related to the owner. Real estate?  Yeah...we do that!

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[ratlifflaw]

What is a Life Estate in property?

That term is intriguing, isn't it? When folks purchase real estate, in most cases, when a person buys real property, they buy that property in "fee simple absolute." Fee simple absolute, simply means that they bought the whole. However, property can be divided up into numerous elements (called estates) and owned by numerous separate individuals. This, of course, gets way more complicated than this post, so I will stick to the "life estate" part.

In common law and statutory law, a life estate is the ownership of land for the duration of a person's life. In legal terms it is an estate in real property that ends at death when ownership of the property may revert to the original owner, or it may pass to another person. This occurs when someone deeds property to another person or persons, and either 1.) reserves a life estate for themselves, or 2.) deeds a life estate to someone else.

The Life Estate holder is the present possessory holder. What?!!! Yeah....sorry. Legalese! It means that the person who has a life estate can hold the property to the exclusion of the world - even from the other deeded owner or owners. The reason for this is that the others who have their names on the deed are considered "future interest" holders. That means that their interest in the property does not become valid until the life estate holder dies.

A life estate can be used to protect property from Medicaid spend down, or can be used to ensure that property transfers automatically to another. There are other uses too. A Life Estate can be a good tool...but do discuss it with your lawyer to ensure it fits your needs!