Something that I've referred to in previous posts is a form of ownership called a life estate. Life estates occur when an owner sells or gives away real property to another, but reserves the right to live on the property for the remainder of his or her life. The person who receives the property has, what's known as, a remainder interest.
Life estates can be useful tools in the estate planning process. This type of ownership can allow the property to be transferred upon death without going through the probate process, because the person who has the remainder interest already owns the property.
Life estates can also have tax benefits. The basis of the property will be the market value at the death, rather than at the time of the gift, which will generally result in a tax savings when the property is later sold.
Life estates can have some benefit for medical assistance planning. Theoretically, medical assistance liens placed on the property for benefits expended for the grantor should disappear upon their death. However, the Minnesota legislature enacted a statute in 2003 which allows medical liens to remain on the property after the grantor's death. Life estates no longer allow property to pass free and clear from any medical liens. However, a life estate may reduce the amount of value of the property that a medical can attach to.
If a life estate seems like a form of ownership that may address some of your estate planning concerns, contact a licensed attorney.
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About Me
- Jennifer Gumbel
- Jennifer is an attorney with Springer and Gumbel, P.A. in Preston, MN. She is licensed in Minnesota and Florida focusing on Estate Planning, Probate, Business Planning and Real Estate.
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- Wills, Trusts & Estates Prof Blog http://lawprofessors.typepad.com/trusts_estates_prof/
- Minnesota Estate Planning Blog http://jtandersonlaw.com/blog/
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5 comments:
I am confused about the liens that can be placed by the state on Life Estate trusts - my mother set up one in 1992. She recently moved into Assisted Living and is on county waiver and receiving MA benefits. Her entire social security check goes to the assisted living home. Her home is being rented out to cover the expenses and taxe and association dues of her home. Her income including savings never run over $2500 per month.
Can the state put a lien against her property even if it has been held in trust prior to 2003?
Generally, a lien cannot be put on a life estate that was created prior to 2003, but the trust and the specific terms of that trust may complicate things. You should speak with an attorney in your area about the lien, who can look at the terms of the trust and the specific circumstances in your case and determine if and how the lien can be removed. Good luck!
Can a life estate be reversed? Mother granted a life estate to 3 siblings who are now fighting over the home. One sibling and fiance live in home with mom. They pay all of mom's expenses and those of the home. They live in MN can mom do anything to reverse this mess?
Life estates are a gift. Even though you retain the right to live in the property for your life, you've given the property away. Recently, Minnesota passed legislation that allows termination on death deeds, which can be revoked. TODDs can prevent this type of issues. You may want to speak with a licensed attorney in your area to review whether a valid life estate was created and what rights your mother has.
Good luck!
my parents have a life estate on the house they are currently living in and they are contemplating moving to assisted living. The life estate was placed on the house via quit claim deed in 2000. i was told by a planner they cant get in to assisted living and receive benefits as long as they still have this life estate. I think this person is referring to the fact that the life estate has value and they need to spend that so called value before they receive benefits under elderly waiver. This was the first I heard of this and its become a major barrier. Your insights are appreciated.
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