A life estate is a legal arrangement that allows a person to have possession of property, such as a residence, during his or her lifetime and, upon their death, for another person or entity to gain ownership of the property.
A life estate gives you the right to live in, use and enjoy property during your lifetime. The person granted the life estate is called a life tenant. The person granting the life estate and the actual owner is called the grantor. For the tenant, the ownership in this type of property is temporary and ends upon death, so the property cannot be left to the life tenant’s heirs. What happens to the property when the life tenant passes away? It goes back to the grantor or someone else that the grantor designates.
A life estate can help property avoid probate and ensure that the intended heir receive the property. It also may reduce estate taxes in certain situations, such as being used within a marital trust.
You may give yourself a life estate interest in your property so that you may use your property during your life and then have it pass to your children upon your death, which will allow the property to avoid probate. Life estates can also be used when an elderly parent wants to transfer their home or property to a child before their death, but wants to continue to live in it until they enter an assisted living facility or pass away.
Another example of using a life estate in estate planning is when a person wants to ensure a property stays in the family. In this case, a person may give their surviving spouse a life estate until he or she either dies or remarries, making it an estate planning tool that can address blended family issues.
An estate planning attorney can best advise you if using a life estate will meet your family’s specific goals and needs, as well as other tools that can coordinate within an estate plan.