What is a Life Estate and How Does it Work?
Those who own a home that they love may dream of giving that home to someone in their family to ensure that the estate stays within the family. But the process of ensuring that the home stays in the family isn’t always simple. An individual who wants to ensure that a piece of real estate is inherited by one of their heirs will need to pass ownership rights of the home through legal documentation like a will, a trust, or a life estate. In this article, the Virginia Beach elder law attorneys at The Law Office of Angela N Manz will discuss what a life estate is, how it works, and more.
What is a life estate?
A life estate is a form of joint ownership allowing a current property owner to remain in the home until they die. After they die the life estate will pass to another specified owner. This allows a homeowner to “pre-gift” their home to their heirs while still maintaining ownership of the home throughout their lifetime. Life estates are most commonly used for homes, but they can be used for any type of real property, including land or anything that is attached to land.
How does a life estate work?
Life estates create a type of legal joint ownership for a piece of property. As an example, let’s say a parent wants to leave their home to their child once they pass. The parent decides to use a life estate to make the transaction easier. The parent establishes a life estate for their home. This makes her the life tenant and the parent’s child the remainderman (also called a beneficiary). The parent can continue to live in the home for the remainder of her life and remains responsible for making property tax and insurance payments.
As a life tenant, the parent no longer has full control over their house. Selling the home or taking out a second mortgage on the home would require the child’s approval. The parent would not need approval to make changes or upgrades to the house. Refinancing would require the child’s approval. It tends to be easier to refinance prior to starting the estate planning process. The parent would not be able to revoke the life estate without the child’s consent once they’re named as the beneficiary. So, it’s important to know what you want before you enter into this type of agreement.
What happens after the life tenant passes?
Upon the parent’s death, the title of the home would pass immediately to the beneficiary (the remainderman). Rather than going through probate, like most assets placed in a will, the only requirement to pass ownership of the real estate to the child is to file her death certificate. If the real estate’s total value exceeds a specific amount, it will be subject to estate taxes. The taxes owed would be paid out of the estate’s assets.
Talk to a Virginia Beach Elder Law Attorney Today
The Law Office of Angela N. Manz represents the interests of those seeking to create a comprehensive estate plan. Call our Virginia Beach estate planning lawyers today to schedule an appointment, and we can begin discussing your goals right away.
