There are many ways to arrange for the transfer of your assets after death. The best choice will depend on the circumstances, and this is why you should work with an experienced estate planning attorney for their recommendations.
You can always visit the experienced estate and elder law attorneys in our firm to discuss the different options that are available to you. In this blog, we will take a look at the legal device called a life estate.
Probate-Free Real Estate Transfers
You can potentially use a life estate to leave your home or some other type of real estate to an heir. The best way to explain how it works is through the use of a simple example.
Let’s say that you own your own home, and you want to leave it to your son after you pass away. You would create a deed transfers ownership to your son but reserves a life estate for you. You would be called the “life tenant.” Your son would be referred to as the “remainderman” in legal parlance.
While you are living, you would remain in the home as usual without disruptions. You would be responsible for the upkeep, any mortgage payments that may be due, taxes, and insurance. The remainderman – your son – would not share any of the responsibilities during your lifetime.
After your death, the remainderman would assume ownership of the property. This transfer would not be subject to probate. This is one of the reasons why people use life estates.
What is probate? It is a time-consuming legal process that takes place under the supervision of a court. A life estate will facilitate quick and simple transfer outside of probate.
Over 30 percent of senior citizens will require nursing home care eventually, and some elders receive paid in-home care.
You can expect to pay somewhere in the vicinity of $60,000, or more, for a year in a nursing home in our area. The median annual cost for an in-home health aide in 2020 was just under $54,000, so you are looking at some pretty big numbers.
Since Medicare is a health insurance program for seniors, and so many elders will require long-term care, you might assume that nursing home expenses would be covered. It may or may not be fair, but in fact, Medicare does not pay for the custodial care that nursing homes provide.
Medicaid will cover the costs if you meet their eligibility requirements. But, you can’t qualify if you have more than $2,000 in countable assets in your name. The “countable” part is significant. Some assets – for example, your home – is not a countable asset. You can still qualify for Medicaid as a homeowner.
However, Medicaid estate recovery is another piece to this puzzle. If you are a Medicaid beneficiary during your life, the program is required to seek reimbursement from your estate after your death. A lien can be placed on the home if you are in direct possession of the property.
If you create a life estate, the remainderman would inherit the home immediately after your passing, and it would be protected from Medicaid estate recovery.
Life Estate Drawbacks
Everything that you have read about life estates to this point may seem to be appealing, but there are some negatives. If you create a life estate, you cannot sell or mortgage the property without the full cooperation of the remainderman, and in Oklahoma, the remainderman’s spouse.
There is also the matter of your diminished interest in the property. You would have the right to live in your home for the rest of your life But, if you create a life estate as an elder, the value of the commodity is limited.
As a result, even if the remainderman was to go along with a sale, your portion of the proceeds would be limited to the value of the life estate.
Plus, if the remainderman is the target of a lawsuit, their interest in the property would be in play, and a lien could be placed on the home. You would not be uprooted, but you would be forced to deal with the legal ramifications.
Take Action Today!
Today is the day to end the procrastination if you been going through life without an estate plan.
You can schedule a consultation with an Oklahoma City estate planning attorney if you call us at 405-843-6100. There is also a contact form on this site you can use to send us a message, and if you reach out electronically, you will receive a prompt response.