Let's say you have a home and you want to leave it to your children. What would be the best way to leave your home to them? Today, I want to address the life estate with the remainder interest to the children. Over the next few days, we will continue to look at the options and you can decide which alternative might work best for you.
Pros of the Life Estate
(1) The Life Estate allows you to continue to have an ownership interest in the property. You can continue to take advantage of any benefits available to a homeowner, ie real estate tax rebates, etc.
(2) If you should need medical assistance in the future, the home would not be subject to recovery by the state since ownership passes to your children upon your death. If your deed was changed to add the children within 5 years of you having to go into a nursing home, your eligibility for medicaid will be affected.
(3) Upon your death, your children would not have to pay an inheritance tax since they are already owners of the property.
(4) The value of your life estate diminishes as you age so any value to creditors is lessen since upon your death, the home becomes the chidren and is not subject to your debts.
Cons of the Life Estate:
(1) Your interest in your home is diminished and your children's interest is greater
(2) If your children have issues with creditors, divorce or bankruptcy, your home is exposed to those issues
The life estate is ideal when: (1) you are well into retirement, late 70s into your 80s and beyond(2) your property is not income producing (3) you want to avoid the inheritance tax and (4) your children do not have issues that might put your home at risk.
Consult with our office if you would like to more about this estate planning technique.
Pros of the Life Estate
(1) The Life Estate allows you to continue to have an ownership interest in the property. You can continue to take advantage of any benefits available to a homeowner, ie real estate tax rebates, etc.
(2) If you should need medical assistance in the future, the home would not be subject to recovery by the state since ownership passes to your children upon your death. If your deed was changed to add the children within 5 years of you having to go into a nursing home, your eligibility for medicaid will be affected.
(3) Upon your death, your children would not have to pay an inheritance tax since they are already owners of the property.
(4) The value of your life estate diminishes as you age so any value to creditors is lessen since upon your death, the home becomes the chidren and is not subject to your debts.
Cons of the Life Estate:
(1) Your interest in your home is diminished and your children's interest is greater
(2) If your children have issues with creditors, divorce or bankruptcy, your home is exposed to those issues
The life estate is ideal when: (1) you are well into retirement, late 70s into your 80s and beyond(2) your property is not income producing (3) you want to avoid the inheritance tax and (4) your children do not have issues that might put your home at risk.
Consult with our office if you would like to more about this estate planning technique.
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