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A Brief Glance at Life Estates

May 30, 2013

Sometimes people would like to leave behind some type of asset to another individual without giving the recipient the right to decide who receives it after the recipient dies. Life estates are sometimes used when this circumstance exists.
Let's explain why and how life estates are typically used by way of example.  Let's say that you get married as a younger adult and you have children. Years pass and you and your spouse ultimately decide to divorce.
Under the terms of the divorce settlement you emerge from the marriage in sole possession of your home.
After a while you meet someone special, and you decide that you would like to get remarried. At this point you have some estate planning concerns with regard to the future well-being of your children.
It would be possible to use a life estate to make sure that your children ultimately inherit your home. You create the life estate and you make your spouse the life tenant. After you pass away your spouse would be able to remain in the home as usual with certain ownership rights.
However, when you are drawing up the life estate you name what is called a remainderman. This is the person or people who would assume ownership of the home after the death of the life tenant.
Since your goal is to leave the house to your children you make them the remaindermen and they would own the property outright after the death of the life tenant, and this assumption of ownership would take place outside of probate.

Wealth Counsel
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