Q: I really enjoy reading your columns and your free weekly web newsletter. They are very informative over a wide range of topics.

I do have a question. Can you tell me the difference, if there is one, between a revocable living trust and a life estate deed? An advisor suggested we do the latter.

A: Life estates are quite different from a revocable living trust. I think of revocable living trusts as being constructed from the top down. In other words, your mother would set up a revocable trust which would name you the beneficiary of her home.

Her property, perhaps her house or an investment condominium, would go into the trust, and the trust would then own the property. However, your mother would retain control of the property. She could revoke the trust at any time or name a different beneficiary. When she dies, the property in the trust would be included in her estate and if it was a house or investment property, you would inherit it at the then current market value.

A life estate means your mother has given or sold you the property but you have given her the right to occupy it while she is still alive. She can’t sell the property or damage it in any way. When she dies, the life estate ends and you will fully control the property again. You’ve indicated that an advisor has suggested you go with a life estate deed. Since you didn’t include any more details about your situation, I can’t weigh in on whether that is good advice or not.

Please consult with an experienced estate attorney who can cover issues such as inheritance tax and gift taxes that may be owed under each scenario.

Feb. 27, 2005