Reservation of Life Estate Forms

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Commonly Asked Questions about Reservation of Life Estate Forms

What does it mean to give someone a life estate?

Life Estate, Definition A life estate is a special ownership arrangement that allows you to share a property with someone else. Each of the people in a life estate has an ownership interest in a piece of real estate typically your primary home but over different time periods.

What does reserved life estate mean?

When the life tenant dies, the remainderman typically receives a step-up tax basis in the property. This means the remainderman takes ownership of the home at its fair market value at the time of the life tenants death. This can save the remainderman capital gains tax when the property is sold.

Rights What rights does a life estate give you?

The person holding the life estate -- the life tenant -- possesses the property during his or her life. The other owner -- the remainderman -- has a current ownership interest but cannot take possession until the death of the life estate holder.

What is the disadvantage of a life estate?

A potential legal disadvantage exists as well, however. The life tenant may become involved in any legal problems that a remainderman incurs. A lien could be filed against the parents home if a parent and a child have created a life estate and the child is pursued for nonpayment of taxes.

Definition What is a reserved life estate?

A life estate is a form of joint ownership that allows one person to remain in a house until his or her death, at which time it passes to the other owner, referred to as the person with the remainder interest.

Is a life estate the same as a trust?

A life estate lets someone use property for life, with ownership passing to a beneficiary after death. A trust, managed by a trustee, controls assets for beneficiaries and offers more flexibility, tax benefits, and avoids probate. Preserving our assets for future generations can be a difficult task.

Why do people create life estates?

Life estates are popular estate planning tools that automatically transfer ownership at the life tenants death to their heirs. Historically, property was transferred from father to son, so life estates ensured that the fathers wife who could not own property in her own name was protected during her lifetime.