Do you live with your significant other in a home that you own? If you are like most of our clients, you will want to make sure your partner can continue to reside there if he/she outlives you, then have the home pass to your children after your partner is gone. You can make this happen by giving your partner a life estate upon your death.
A life estate gives your partner the right to use, occupy and possess the residence for the remainder of his/her life. Unless you indicate otherwise, your partner, as life tenant, is responsible for maintaining all costs associated with ownership. Costs includes taxes, maintenance fees, mortgage, insurance, repairs, etc. A life estate can be given to your partner through either a will or a trust, although as you read on, you will see that there are advantages to using a trust for this purpose.
Giving your partner a life estate sounds straightforward enough. But like most things in estate planning, there are several issues to consider to make sure all goes smoothly and unintended consequences are avoided. Here are four questions for you to discuss with your estate planning lawyer as you consider a life estate for your partner.
(1) Can your partner afford to live there without you?
It’s one thing to permit your partner to continue living in your home. It is another for your partner to be able to do so. Your partner will be responsible for all expenses. Can he/she afford the upkeep? If not, and if you are willing and able, you can provide the necessary funds to maintain the residence through your trust.
If your partner fails to properly maintain the house, due to lack of funds or any other reason, the remaindermen (your children) could take legal action to have your partner removed from the home. That would be an ugly situation, and certainly not the kind of legacy most people want to leave.
(2) Should I include the life estate provision in the deed to my home?
We urge against granting a life estate through a deed. Once you execute the deed granting your partner a life estate, the decision is irrevocable. What happens if your relationship with your significant other turns sour, or comes to an end? It is better to grant the life estate through your will or trust, because a will and trust can be amended so long as you are alive and competent.
(3) Do you want to place any restrictions on your partner’s life tenant rights?
Granting a life estate through a trust allows you to place restrictions and conditions on the life tenant’s rights. For example, many clients are not keen on the idea of their significant other sharing their home with a new boyfriend or girlfriend; they will specify that the life estate ends if that occurs. Another common restriction is that the life tenant cannot rent the home. Some clients require their partner to periodically provide trustees with proof that the home is being properly maintained and all expenses paid in a timely fashion.
(4) How can a life estate protect my partner if I am disabled?
What happens in the event you become incapacitated and must move to a memory care facility or nursing home? Do you want your significant other to have the right to stay in your home? Do you want to prevent your successor trustees (who will take over if you are no longer capable of making your own decisions) from removing him/her from your home? Obviously, a trust provision that makes your partner a life tenant upon your death is of no value while you are still alive. In fact, if trustees know your partner’s life tenancy will commence upon your death, they may be more likely to remove him/her from the home once you are no longer living there.
The answer to this dilemma: Grant a life estate to your significant other not just upon your death, but also in the event of your disability. Your trust should also outline the extent and nature of home expenses the trust funds will cover.
Allowing your partner to remain in the home could make it easier for him/her to visit you after you move into a facility. This is an especially important feature for clients whose relatives live at great distances and would otherwise have few visitors.
These are questions you must consider to determine how a life estate fits into your estate planning goals. Discuss your answers with your estate planning attorney. Your plan should provide you and your significant other with the peace of mind you both deserve.