Most people think of estate planning as designating how assets will be handled after they die or if they are no longer able to speak for themselves. However, certain aspects of estate planning, like living trusts, are important for protecting your assets while you’re still alive and well.
There is something called a “life estate” that covers residential property that is owned by people while they are still alive. Life estates are often created so that people don’t have to risk giving up their property if they go on Medicaid.
When someone creates a life estate, it is valid for as long as the “life tenant” or grantor is still alive. That person still has possession of the property and any profits or rent obtained from that property.
However, that life tenant still has an obligation to “remaindermen” not to waste or sell the property. These remaindermen are the ones who will own the property when the life tenant passes away, and there is no probate proceeding.
While a life estate may be a good idea for those who don’t want to risk losing their home to cover health care costs, it’s not the best solution for everyone. Those with significant resources and their beneficiaries may need to deal with estate and gift taxes.
Estate laws vary significantly by state. That’s why it’s essential to consult with an experienced California estate planning attorney in order to determine how to best protect your assets while you’re still alive and to ensure that your wishes are carried out if you become incapacitated or die.
Source: FindLaw, “Life Estate Q and A,” accessed March 08, 2017