Legal Blog

The Weekly Scenario: Setting Up A Life Estate

Question: About 10 years ago, my mother set up a life estate for her residence with my sister and I as remainder individuals. My sister is considering moving into my mother’s home to care for her.

What happens when my mother passes away as far as the sale of the home? If my sister wants to continue to live in the home after my mother’s death, how do I receive my share of the value of the home? Is it possible for my mother to change the title of the home and give the property to my sister (leaving me out)?

Answer: It is not possible to change the title at this point without your consent. The way this Deed works is that you and your sister each own ½ of the residence as tenants in common, subject to your mother’s life estate. After your mother dies, you and your sister will need to agree on the sale of the property and if you cannot agree, one of you can file an action with the court to force the sale of the house (“In Lieu of Partition” action). You and your sister will be entitled to one-half of the sale proceeds.

Hopefully, before that were to take place, you and your sister can agree on a price or perhaps she will be able to obtain a mortgage to buy you out. If it is your mother’s intention for your sister to continue to live in the house after her death, you and your sister should speak to her now to understand her wishes.

While it may not be possible for all the parties to agree on a change of the Deed, please note that it may be possible to do some planning to achieve your mother’s goals. One thing to note is that your mother may have retained the right to borrow against the home’s equity. The ability to do so would be set forth in the Deed. If this is the case, your mother could encumber the property (e.g., cash out re-fi).

As always, if you have any questions or would like to learn more, please let me know.

ABOUT STEVE SHANE

Steven E. Shane

Steve Shane provides strategic counseling to clients in need of estate administration, charitable giving and business continuity planning while minimizing estate, gift, and generation-skipping transfer tax exposure. He offers legal guidance to clients on asset protection and the proper disposition of assets in accordance with the client’s objectives, while employing tax planning techniques such as the use of irrevocable trusts, life insurance planning, lifetime gifts and charitable trust. He is also experienced with drafting documents for business planning, the incorporation and application for exemption for Private Foundations and the administration of decedents’ estates.

 

 

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