One way to divide property is by establishing a life estate. Say, for instance, you wish to leave your home to a single person, but when that individual passes away, you desire the home to pass to another person, rather of to somebody your preliminary beneficiary selects.
The property behind a life estate, a tool frequently used where realty is worried, is that the preliminary recipient (who is often described as the life tenant) is granted using the property for the rest of their life. Once that individual dies, the property passes to the remainder beneficiary.
Here is one example: You are separated and remarried. You choose to provide your new other half a life estate in your house. When she dies, the house passes to your kids from your previous marital relationship. That method your spouse belongs to live, and your children eventually inherit the house.
As you can inform, life estates are one method to divide the interest in your properties– but a life estate can develop problems.
Let’s usage property as an example. What happens if:
u2022The house needs repairs or significant upkeep– who pays? If the life tenant is accountable however can’t afford the costs, then what happens?
u2022What if the life tenant wishes to sell the property? Will the Trust utilize the earnings of the sale to buy a brand-new home, and will that home pass to the remainder beneficiary?
u2022What if the life tenant has to move into assisted living or into a nursing home?
As you can tell, life estates must be thoroughly crafted to guarantee a range of factors to consider are taken into account. And no matter how hard you try, a life estate can cause stress in between beneficiaries, since both celebrations have an interest in the property or property– and both parties might disagree on the use of or care of that property.