Our Centennial Estate Planning Attorney Answers Your Questions
There are many different estate planning tools that can simplify matters for your beneficiaries after your death. One of those tools is a life estate. If you have a home that you want to pass to a beneficiary, such as a child or grandchild, then you should consider learning more about how life estates can help.
What Is a Life Estate?
A life estate is a form of joint ownership over a property or interest in a property. With a life estate, a person can reside in a home until his or her death, when the home passes to the other owner. This means you can use a life estate to pass your home along to your children while still residing in the home until your death.
Your home will not pass through probate court, which means the transition of ownership is simplified for your beneficiaries.
How Does a Life Estate Work?
With a life estate, two or more people have joint ownership in a home. However, these parties have ownership at different periods of time. The life tenant, who is the person holding the life estate, has ownership of the property during his or her life. However, the other owner, also called the remainderman, cannot take ownership of the home until the life tenant passes away.
What Are the Rights of a Life Tenant?
The life tenant has control over a property while she or he is still alive. While a life tenant is still alive, he or she can rent out, perform maintenance on and improve the property. Ownership of the property automatically passes to the remainderman (or remaindermen if there is more than one) after the life tenant passes away.
However, a life tenant cannot sell or mortgage the property unless the remainderman agrees with the decision. If a sale occurred, the life tenant and remainderman would share the proceeds. The amount given to the life tenant depends upon his or her age. If the life tenant is older, he or she would receive less from the sale while the remainderman would receive more.
What Are the Benefits of a Life Estate?
A life estate keeps a property from passing through probate court. Instead of going through probate, the property passes to the remainderman automatically at the time of life tenant’s death. In some cases, probate can be a time-consuming process for family members.
Another benefit of a life estate is that you can pass your home to a family member without having to give up residence.
Are There Disadvantages to a Life Estate?
You may trigger a Medicaid ineligibility period if you transfer a property and retain a life estate. This may happen if you apply for Medicaid within five years of the transfer.
In Colorado, be aware that the life estate interest may still be counted as a fractional interest for Medicaid purposes even if five years has passed since the transfer.
Depending on where you live, there may be a way around this dilemma. You may be able to purchase a life estate in someone else’s home, pay the required amount on the home, and then live in the home for one year.
Contact Our Centennial Estate Planning Attorney for More Information
Do you have questions about life estates in Colorado? Contact our Centennial estate planning attorney for assistance. Skipton Law, LLC can help you learn more about life estates or using other estate planning methods to help your family. Contact us by dialing (720) 770-3880 or by using the contact form on our site.