A life estate is a deed that entitles you to remain in your home for the rest of your life and allows your designated heirs to inherit it without the hassle of probate-court proceedings when you die.
How can you avoid probate when it comes to the transfer of your home after death? Maybe you should consider a “life estate” as part of your plan.
If the concept of a life estate is new to you, then an article in The Wall Street Journal ought to be on your reading list. As the article titled “An Easy Way for Heirs to Inherit Your Home” explains, a life estate for real estate operates like a “payable-on-death account” for a bank account.
Here is how a life estate works. First, you draw up a deed to your house naming your heirs as remaindermen beneficiaries. Second, you live in the house for the rest of your life. Third and lastly, after you pass, your named heirs need only to record a document to terminate the decedent’s interest to assume title to the family home. This can save time and money often associated with probate. Simple?
A life estate may be too simple, depending on the circumstances. As with most things legal, it can get complicated quickly. For example, you will not be free to sell your home during your lifetime without beneficiary consent and there are tax issues to consider.
Depending upon the home and your objectives, there may be better ways to transfer the family home. Regardless, a life estate is a proven transfer tool for the right circumstances.
Reference: The Wall Street Journal (February 9, 2014) “An Easy Way for Heirs to Inherit Your Home”