Should You use a Life Estate in You Estate Planning?
The real purpose of Estate Planning in Idaho is to provide specific protections to the individual while they are alive and to make some decisions about who their property, money, and assets will go to after they die. Estate planning usually consists of documents that allow you to name individuals to make decisions for you if you become disabled and unable to care for yourself and your daily life affairs. Estate planning is also designed to protect you from individuals who may try to take advantage of you or your infirmities towards the end of your life. Finally, estate planning is the mechanism used for you to make decisions about who to distribute your property to and how the distributions will be done after you die.
At the Racine Law Firm, our team of Idaho estate planning attorneys work to complete a customized estate plan for you to meet your specific needs. We don’t apply a cookie cutter approach. Rather we take the time to help you determine your unique needs to be protected and the goals that you want to achieve. Our talented team of Idaho estate planning lawyers includes partners Randy Budge and Lane Erickson and attorneys Nate Palmer and Dave Bagley, each of whom have received the highest reviews possible from current clients. Our team also has the highest ratings possible from other attorneys and from judges that they work with regularly through the estate planning and probate proceedings they are involved in.
We often have clients who come in and ask is if they can use a life estate as part of their estate planning when it comes to real estate. Many individuals have heard that this is a good idea from family and friends. In helping our clients decide whether using a life estate is a good idea we want to make sure they understand three specific things.What is a Life Estate?
The first thing we want an individual to understand is exactly what a life estate is. There are many different kinds of ownership interests that a person can have in real estate. A life estate is one of those ownership interests. In actuality it really isn’t an ownership interest at all. Rather, it is simply a right of possession for a period of time. That time frame is during the individual’s life which is why it is called a life estate.
The way of life estate is created is really quite simple. Any individual who owns any type of real estate has the ability to issue or sign a deed that transfers that property to another individual. This can be done as a gift, or it could be done through the sale of the property. It is on the actual written deed that a life estate is created. The deed would describe the property being transferred as well as who the property is being transferred to. The very last thing that would be included in the deed is a reservation of a life estate with the following language: “Grantor hereby reserves a life estate interest in the above-described property.”
Legally, what this type of transaction means is that title to the property or in other words actual ownership of the property, has been transferred to the recipient who is known as the Grantee. However, before the titled owner of the property can actually take possession of the property the life estate interest has to expire. This means that the individual who is giving the deed to another person reserves a life estate for themselves. With a life estate interest the individual has the ability to keep possession of the property but they don’t actually have any ownership interest in it. When that person passes away, the right of possession automatically passes to the titled owner of the property who is the named Grantee.How a Life Estate Could Help You
The second thing to understand is how a life estate can help you. There are several ways. First, it gives you the ability to continue to live in your home or property as long as you are alive. This gives you the ability to keep possession of this property and to enjoy using it during the remainder of your lifetime.
Additionally, a life estate could be helpful because Idaho requires a probate to be completed any time an individual has an ownership interest in real estate when they die. A life estate interest in real estate does not constitute an ownership interest that would trigger the requirement for a probate to be completed when you die. In other words, if all you have is a life estate interest in some land, a probate is not required for you unless you have an ownership interest in some other type of land.
Further, a life estate could help you by reducing the value of your estate while you are alive so that you might qualify for Medicaid. Medicaid is a program that is used to provide assistance to individuals who must go into an assisted living center. Medicaid help defray or pay for the cost of this type of care. If an individual continues to own a home the Medicaid that is paid towards their stay in an assisted living center will become a lien on the real estate that they own. From a practical standpoint what this means is often a family will lose the family home due to the expenses of having their parent in an assisted living center. By having a life estate interest the parent can continue to live in the home but the home is not considered an asset of their estate so long as all the Medicaid eligibility requirements are met.How a Life Estate Could Hurt You
However, everything is not necessarily all candy and roses when it comes to life estate interest. The third thing to understand is that there is also a negative side to life estate interests when it comes to estate planning. One of the negatives is that when a life estate is used, a person will lose their homestead exemption that they have in their home. In Idaho, this could be significant because the homestead exemption has a direct impact on the amount of property taxes an individual must pay on their home. If you transfer your real estate to a child and reserve a life estate for yourself then you will no longer be eligible to claim the homestead exemption. This likely means that your property taxes will dramatically increase.
An additional negative side to a life estate interest is that you are actually transferring the full ownership interest of your home or property to some other person. This is usually a child. This means that if you do this and your child gets into trouble financially the home could be foreclosed on and taken away from them, which would defeat your reason for giving it to them in the first place.
As you can see, there are many aspects and issues involved in using a life estate as part of your Idaho estate planning. Whether it is wise or not for you to utilize this option will depend on your individual circumstances. We have helped many clients navigate the decision-making process in deciding whether to use a life estate or not. We are confident that we can help you too.Enlist an Idaho Estate Planning and Probate Attorney to Help You
Our experienced Estate Planning team of attorneys can help you and your family with your Idaho estate plan or with your probate needs. Whether you are seeking your own customized Estate Plan or are in need of a Probate for a loved one who has passed, we are available to discuss your options and answer your questions at an initial consultation. Call us toll free at 877.232.6101 or 208.232.6101 for a consultation with the Racine Olson team. You can also email us directly at firstname.lastname@example.org. We will answer your questions and will help you solve your Idaho Estate Planning and Probate problems.