Estate Planning - The Life Estate

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					Estate Planning - The Life Estate
The life estate is something every first year law student learns about
when they study the arcane and often bizarre history of property law that
harkens back to the days of English knights, lords and serfs, and the
transfer of property through the ceremonial throwing of dirt clods with
oaths of duty to accompany. The life estate is about as old as they come
as instruments of wealth transfer go and students love it, because it is
relatively easy to understand. Apart from what students love and what is
easy to remember, however, the life estate still has practical value
today in your estate planning and assets management schemes.
The basic idea of the life estate is that a person can be left a piece of
property for life, and upon their passing, the property in question can
go to whoever is designated to receive that property afterward. The
individual or group who receives the property after the life-tenant
passes is called the remainderman or remaindermen, which is useful only
in that it helps one to remember that the person who remains gets the
property. If, for example, one wants to leave a family estate that has
been with the family for many generations to their spouse and then have
it immediately pass on to their children or another relative who will
maintain the estate for the generation to come, then a life estate might
be the perfect vehicle to do so. Another example is the same family
estate, left to a surviving spouse until the surviving spouse either dies
or remarries. Again, the aim is to ensure that the estate stays in
family, a contingency which is threatened by the remarriage because that
creates a new marital joint-tenancy, absent any other provision. Often
the life-estate was used to keep assets, like the family home, headed
down a single line of familial ownership.
However, the life estate has other uses, for example, it can leave an
asset to be owned by one person until the death of third person. If an
older relative has become incapacitated, such that it is difficult for
them to make decisions for themselves, then the asset can be left in the
care of another for the incapacitated person's lifetime. An example might
be, that Blackacre (the fictitious name for a piece of property used in
law schools everywhere) is left in the care of cousin Tilly, until great
aunt Nelly's death. Thus, Tilly is allowed to make Nelly comfortable at
Blackacre (the family home) until Nelly passes on. In this instance,
Nelly's life is what is called, the measuring life of the life estate,
and Tilly's ownership ends when Nelly is gone.
On the whole, the life estate may be falling out of use for a number of
reasons and being replaced by the much more fluid instrument of the
trust. But, the life estate still captures, from time to time, our
instincts regarding how property is to pass from one generation to
another and that is why it is still relevant even for an estate planner
who uses it very rarely. It helps us to ask and to get the answer to very
difficult questions, which is part of the act of estate planning. Both
the client and the attorney must face tough questions, and the life
estate (even if it is sometimes regarded as a legal relic of the past)
tells us how people used to answer questions of intra-generational wealth
transfer and why. We may use different instruments to bring about our
legal ends (or we may not), but even if we do, the life-estate still has
relevance in helping us think about the questions that underlie the
choices to be made in estate planning.
Ronald Hudkins is an advocate for consumer awareness. He has noted that
more than 70% of the American public fails to make appropriate estate
plans prior to death or incapacitation and as such; authored an Ebook
"Asset Protection and Estate Planning for All Ages" It is available for
free download at http://stores.lulu.com/rhudkins

				
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