There are different ways to facilitate asset transfers after you are gone, and you should understand the options for two related reasons. On one side of the coin, you make informed choices when you understand the facts, and on the other side, you avoid mistakes.
With this in mind, we will look at the pros and cons of life estates in this post.
Transfer of Real Property
You can potentially use a life estate to arrange for the transfer of your home and other types of real property.
If you take this step to facilitate the future transfer of your home, you would be called the “life tenant.” The individual that will be inheriting the property is called the “remainderman.”
After you execute the paperwork, your living arrangement would not change at all. You would continue to live in the home for the rest of your life, and you would be responsible for the mortgage if there is one, taxes, insurance, etc.
The remainderman would have no input, and they would have no responsibilities. However, they would have a great deal of control. If you want to sell the property or take out a mortgage, your hands would be tied unless you can get the cooperation of the remainderman.
There is another drawback in this regard. Let’s say that you want to sell the property when you are 80 years old, and the remainderman agrees to go along with it.
We will assume that the house sells at full fair market value. You and the remainderman would not split the proceeds equally, because you would only be selling your interest in the home. This amounts to the right to live in the home until you pass away.
At the age of 80, your life expectancy would not be very long, so your portion would be quite limited.
Benefits of Life Estates
On the positive side, some people use life estates because they want to avoid probate. If you simply leave the home to someone in a will, the document would be admitted to probate. This is a public proceeding that is costly and time-consuming. The transfer through a life estate would not be subject to probate.
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Mr. Nirenstein is licensed to practice before the courts of the State of Connecticut and the United States District Court. He is a member of the Connecticut and Hartford County Bar Associations, and the Estate and Probate, Elder Law, Business Law and Real Estate Sections of the Connecticut Bar Association.
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