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What is a LIfe Estate?

What is a Life Estate?A life estate is property that is owned by an individual only through the duration of his or her lifetime. When the individual dies, the ‘estate’ (or real property) is returned to the original owner or the other people named in the life estate agreement (called ‘remaindermen’). Think of a life estate as a temporary ownership agreement.

When would you want to consider a life estate arrangement? The estate planning tool usually comes into play when there is a desire to pass down real property–like a family home–to specific heirs without excessive probate and other legal complications.

Here’s a common scenario:

      Pam is now widowed and has lived in her home for 40 years. She wants to pass the home down to her son Joe when she passes away. Pam could consider transferring the home’s title to Joe now, while retaining a life estate in the home. This way, Pam can continue living in the home and carrying out all the home-owner duties she always did (such as collecting rent and paying all taxes and expenses). This makes Pam the ‘life tenant’ of the home. When Pam passes away, the life estate agreement expires and home ownership transfers to Joe.

Second marriages are a common reason families turn to life estate agreements as well. If Pam had gotten remarried, she may prefer to allow her new spouse to live in her home for the rest of his life even if she passes away first. She can give her spouse a life estate that will allow him to continue to live in the home until he passes away or chooses to move. At that point, the home can pass on to Joe as it would have before.

There are certain limitations that must be considered when weighing the life estate option. Life tenants are prohibited from damaging or devaluing the land, a limitation which can cause tension among family members in such an arrangement (with the owner often accusing the life tenant of “letting the place go”). But it’s a worthy consideration for many families–one that should certainly be investigated with the assistance of an estate planning attorney. This is an example of a situation where you might want to consult an estate planning attorney rather than do it yourself.

A good resource for finding affordable attorneys is the Directory of Online  Law Firms that appears on this Web site. These attorneys  offer fixed fee legal services online for an affordable and fixed fee. You can purchase legal advice online by  the questions or issue and avoid spending hundreds of dollars for a consultation or making a commitment to a long term pre-paid legal plan where you are required to make a monthly payment whether or not you use the plan’s services.