October 28

What is a “Life Estate” on a Deed?

What is "Life Estate" on a Deed?

What is a “Life Estate” on a Deed? Estate Planning New Jersey

Often, people come to me asking if it would make sense for them to “gift” their house to their children or to a spouse for planning purposes. There are times this makes sense, and times where it does not. One of the biggest concerns that my clients have either way is that they do not want to lose the ability to live in the property if they choose to stay there. Using a type of deed called a “life estate deed,” I can give them the right to live in the property as long as they live.

A life estate deed is really just a deed (which transfers a real estate interest from one person to another) with some special language thrown in. The language creates the “life estate,” which for that person is the right to live there as long as they want to. There is also a person who owns the property subject to the life estate, and that person is called the “remainderman.” That person takes full title to the property once the holder of the life estate dies. The deed endows the Life Tenant with control of the property until the time of his/her death. They can rent the property and receive those rents, or they can live there. They can in theory “assign” that life estate to another person, who would then have the ability to live there until the original life estate holder died!

The life estate does have limitations. First, if the life estate holder dies, anyone else on the property may need to move if the new owner does not want them there. Also, a life tenant is required to keep the property up, preventing the value from wasting away. The life tenant needs to pay the taxes and maintenance expenses, commonly known as “carrying costs.” When the life tenancy of the Life Tenant terminates, the Life Estate Deed transfers ownership of the property to the remainderman.

Whether it makes sense in anyone's specific circumstances to take a “life estate deed” would be a question to ask an attorney. There are good asset planning reasons why for some people it would be a great move, whereas for others it could be the kind of mistake that would cost family members many thousands of dollars paid to either a nursing home or to the federal and state taxing authorities. It is a wonderful idea to understand the tax and estate circumstances of the transfer before signing the document. In my practice, I often explain to my clients that the documents are the easy part – it's understanding what is in them and how they work where I am of the most value. 

Archer Law Office Can Help

For More Information Contact this office (609) 842-9200


You may also like

Leave a Reply

Your email address will not be published. Required fields are marked

{"email":"Email address invalid","url":"Website address invalid","required":"Required field missing"}