One way to divide property is by setting up a life estate. State, for example, you want to leave your house to someone, but when that person passes away, you desire the house to pass to another person, rather of to somebody your preliminary recipient selects.
The property behind a life estate, a tool commonly utilized where property is concerned, is that the preliminary beneficiary (who is in some cases referred to as the life occupant) is granted using the property for the rest of their life. Once that individual dies, the property passes to the rest beneficiary.
Here is one example: You are separated and remarried. You decide to provide your brand-new spouse a life estate in your home. When she passes away, the house passes to your kids from your previous marital relationship. That method your other half has a place to live, and your kids eventually inherit the house.
As you can inform, life estates are one way to divide the interest in your properties– but a life estate can create issues too.
Let’s use realty as an example. What occurs if:
u2022The house needs repairs or significant maintenance– who pays? If the life tenant is responsible but can’t afford the bill, then what happens?
u2022What if the life tenant wishes to sell the property? Will the Trust utilize the proceeds of the sale to buy a new home, and will that house pass to the remainder beneficiary?
u2022What if the life occupant needs to move into assisted living or into a nursing home?
As you can inform, life estates should be carefully crafted to ensure a variety of considerations are considered. And no matter how tough you attempt, a life estate can cause tension between recipients, because both parties have an interest in the property or asset– and both celebrations may disagree on making use of or care of that possession.