Revocable Living Trust Versus A Life Estate Deed

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


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4 Responses to Revocable Living Trust Versus A Life Estate Deed

  1. gary says:

    2 questions:
    Can i put a property in a living estate if there is a balnce owed on a mortgage?
    Will putting a property in a living estate for a child disqualify the child a first time mortgage benefit?

  2. rob says:

    the question: Is it ok for someone to encumber an irrevocable trust to secure personal debt? Does it make a difference if they have a life estate in the property that’s in the trust? Assume the person in question is both Grantor and Trustee.

  3. William says:

    My mother owns the house i live in. Can she get homestead exemption on my house? Im also 100% disabled.

  4. Lynn says:

    A question regarding a Living Trust: My father-in-law has died. The attorney talked him into giving his girl friend a living trust in the house they lived in. However, the house is to go to two of the sons. One is my husband. The question is; if this girl friend does not pay for up keep or taxes, what legally can we do? Do we have the right to evict her in some way being that the house is not owned by her? What are the rights of the home owners?

    Thanks

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