The term life estate is often heard in estate planning and real estate matters but is often not understood. Life estate is a joint ownership of property. It allows an individual to live in their home until their death at which time it passes to the other owner. Life estates are often established to avoid probate. They can also be part of MassHealth planning.
If you have a life estate you are known as the life tenant. Your home can be transferred to your beneficiaries, or remaindermen, while having a life estate. The life estate enables you to live in and manage your home until your death. The life tenant is required to maintain the property, pay the mortgage, property taxes and insurance and may rent it out and improve it. The life tenant may not sell or mortgage the property without the remaindermen's agreement. Upon the life tenant's death the home and its control would go to the remaindermen.
Property that is in a life estate does not become part of probate. It is passed directly to your children or other beneficiaries. Your property does remain an asset of your estate for estate tax purposes. The property is inherited at date of death value. Life estates can be very beneficial for MassHealth planning purposes.
If you do sell your home while it is in a life estate the proceeds are divided between you and the remaindermen. The money is apportioned based on the life tenant's age.
Life estates can be a valuable part of your estate plan. They are not however for everyone! There are many considerations to keep in mind when deciding if they are right for you. Contact Shoffner & Associates to determine if it would be beneficial for you and your circumstances.
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