When a person passes and leaves their assets and property to their heirs, there can be complications in the transfer of those assets, even with a will in place. Most wills are subject to judicial review and must go through probate before they are released, which can delay the process of transferring assets by weeks or even months. However, there are some ways that people can restructure their property ownership during their lifetime to make this transition seamless.
A life estate is a type of deed that does just that; it establishes the property’s heir as a co-owner, so that when the life tenant passes, ownership automatically goes to the heir, or remainderman. The life estate allows the life tenant to maintain control of the property and manage its upkeep until they pass. They can choose to use it, rent it, or modify it as they see fit, but they cannot sell or mortgage the property without the agreement of all listed remaindermen.
Benefits and Risks of Life Estates
There are several benefits to this type of arrangement. The property does not have to go through probate, as the life tenant’s ownership ended upon their death, so it is not part of their estate. The remainderman does not have to wait for the reading of the will to assume ownership, as they are already entitled to it. A life estate can also help seniors meet the eligibility requirements for receiving Medicaid assistance. Owning or selling a home often puts seniors over the asset threshold to be eligible for assistance, but if a life estate is set up at least five years before they apply for Medicaid, the property will not count toward their assets.
Life estates can have some complications, so it is important to choose the right person to enter into an agreement. The remainderman now has an ownership stake in the property, so their creditors can put a lien on the property. They cannot force the life tenant to give up their possessory rights, but if the property is sold, the proceeds must pay the lien. The remainderman must consent to selling the property in any circumstances, and they are entitled to a portion of the proceeds; generally, as the life tenant ages, the remainderman’s ownership share increases. The property may also be counted as an asset in any divorce or bankruptcy proceedings that the remainderman is subject to.
A life estate is essentially a deed to a property, but with many more factors at play. It is important that they be written carefully, so that the rights and responsibilities of all parties involved are clearly understood. An experienced estate planning lawyer can help navigate these complexities and ensure that the right outcome is achieved.
Brooklyn Elder Law Lawyers at Korsinsky & Klein, LLP Help Seniors Set Up Life Estates
If you have concerns about life estates, the Brooklyn elder law lawyers at Korsinsky & Klein, LLP have the knowledge and experience to handle all types of estate planning cases, including detailed life estates. We will thoroughly review the facts of your case and draft a comprehensive document that protects your interests. With offices conveniently located in Brooklyn, New York, and Lakewood, New Jersey, we help seniors and their families throughout Manhattan, Long Island, and Westchester, New York. Call us today at 212-495-8133 or contact us online for an initial consultation.