Thursday, September 26, 2013

Know the Consequences of Life Estates

A life estate can be a somewhat simple way to make sure your real property easily transfers to another when you die, but you need to know what you're getting into before you sign off on the deed. Life Estates have many consequences.

First, the property is transferred and your kids have ownership rights the day you sign and deliver it. This means that your kids may have things come up, like divorces or creditors that could create a title issue on your property. For this reason, a transfer on death deed can be a better option. Second, you can’t take the property back. If you want the property free of your kids’ ownership, they need to deed back to you. Finally, transferring property of any kind may have significant gift, estate or income tax issues. A life estate may be a good idea, depending on your circumstances. However, you should meet with both an attorney and CPA to make sure you don’t get surprised later on.