Use of a Life Estate Should be Rare – Part 1
Saving the family home from the high cost of nursing homes and other long term care expenses is high on the set of priorities of most middle-class seniors. Elder law attorneys have educated clients on the various solutions to this problem over the years. Perhaps the most popular legal solution to this problem is the creation of a life estate. It is also the most overused and usually inappropriate tool we have at our disposal. Its use should be rare.
A life estate is created by preparing a new deed. The deed conveys the property, in the usual manner, from the party of the first part to the party of the second part. For example, Mom transfers her property to the names of her children. The only addition to this is that in the body of the deed, perhaps after the description of the property, the following language is inserted (or words to this effect): THE PARTY OF THE FIRST PART HEREBY RETAINS A LIFE ESTATE.
As is evident, the creation of a life estate is simple. It is a concept that all lawyers and clients can understand with ease. My contention, however, is that its simplicity breeds a climate for its inappropriate and over use.
Next week we’ll explain the benefits of the life estate.