When should homeowners use a revocable living trust versus a life estate deed? These are important questions to answer. Sign up for Ilyce Glink’s Love, Money + Real Estate newsletter for more questions like these.
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? When should I choose a revocable living trust versus a life estate deed?
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.
How a Revocable Living Trust Would Work
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.
What is a Life Estate?
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.
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?
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.
My mother owns the house i live in. Can she get homestead exemption on my house? Im also 100% disabled.
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?
Was this question ever addressed? I do not see an answer and am in an almost identical situation, except that my father holds a LIfe Estate in Massachusetts for his primary residence and has not died yet. I believe that any rights that the girlfriend has end with the death of the Life Estate recipient, but how does one remove the girlfriend from the house that has now passed to the family member in Massachusetts to whom it was deeded?
I’m assuming from your comment that someone left your father his house, as a life estate, and that it will pass to you when he dies, not his girlfriend.
So, when the time comes, you may have to literally throw her out – you can file eviction proceedings and have the local sheriff come out, but just know that it’ll be messy no matter what happens. If you like her, but need her to go, you can try to sit down and work out a timetable where she’ll vacate the premises.
It’s easy to understand why leaving might be hard for her – she’ll have lived in that home for however many years, and might not want to go after losing her boyfriend (your dad). But, if she doesn’t own the property, there are only a few choices: You can rent her the property (and she has the wherewithal to pay) or sell her the property (same issue), but she needs to understand her time there is limited.
I feel for you – when the time comes, this won’t be easy for you either. Since your dad is alive, it would help to have a conversation with him about what he wants to have happen, should he and his girlfriend still be together at the time of his death. At least that way you know what wishes you should honor.
Thanks for your comment,
Ilyce Glink, Pubisher
My father had a living trust and wanted to make sure that I had a place to live after his death. My father made me the trustee of his trust and had a amendment written up so I could stay in his home after his death (life estate). My question is other then selling the house if I no longer want to live in it, is there anyway of having the Virginia property taxes reduced? I am 62 and only make $33,500 a year. If so how would I go about this? Also I have a older sister and brother. I do know that if I choose to sale the house, I am to give them part of what the percentage is of the sale of the house (this is no problem). I want to make sure I am doing all the right things.
I have two REIT accounts, I want to shelter from nursing home costs and to avoid probate proceedings. I sold some land I inherited from my parents and did two (2) 1031/721 Exchanges to defer paying capital gains and to create an income stream from the dividends or shares I receive from them on a quarterly basis. .I am wondering what would be the best way to protect the REIT accounts from probate and to shelter the money from nursing home costs and to be able to control the assets at the same time. Any advise? .
Is a “warrranty deed with reservation of life estate” revocable?
My parents left their house in the names of their 3 daughters. My dad has passed away (12/2019) and my mom in a nursing home with dementia since 8/2019. The house is in a living trust. Does this mean that if we sell the house, even though my mom can liver live there and has been deemed incapacitated that she would get a percent of the sale and the remaining money would get split 3 ways? If this is true, what percent would she get ? She is also 85 years old.
If the property is in a trust that names the daughters as the beneficiary, then the parents no longer own it. If you (i.e., the trust) sells the property, then the beneficiaries get the money. Your mom has dementia, lives in a nursing home (memory care unit, I hope?) and isn’t going to live in the property again. So, if you’re right about the type of trust (living trust) instead of a life estate (where she would have the right to live in the property for the rest of her life, but no longer own any of it), then the trustee may sell the property at any time. You and your two sisters would share the proceeds and your mom would get nothing.
Of course, I may have missed something along the way. Consult with the attorney who drew up the trust or the trustee (if it isn’t you) for more details.