The Lifeline that a Life Estate Can Provide

lifeline estate

by Leonard T. Schwartz, Esq.~What is a Life Estate? The best way to answer that question is by sharing this story.

My client Tom McGuire has been living happily at 101 Peachtree Way for 40 years. He was living there with his mom, who recently passed away. In accordance with her will, her home is to be transferred into both Tom and his sister Anna’s names.

Anna and her family live in their own home in the next county. Tom wants to continue to live at 101 Peachtree because he is comfortable there, has a great relationship with the neighbors, and since Tom has a disability, the house has been modified for his needs.

When Tom and Anna came into my office last week, I suggested they consider a life estate.

A life estate is a type of joint ownership of real estate in which one but not all of the owners live at the property.

Sometimes, parents will enter into a life estate with their children because they want to be able to pass along their property to them before they die so that the children will not have to go through the often long process of probate. But, wanting to continue to live in the house that is now owned by their children, they need to have a life estate in place as a guarantee that the children cannot sell the home or try to remove the parents from the home before the parents are ready to move elsewhere or pass away.

At 101 Peachtree, even though Tom and Anna are neither father and daughter nor mother and son, a life estate is still something I asked them to consider for the following reasons:

  1. Protection of residence: The life estate protects Tom’s residential status at 101 Peachtree, for as long as he lives, or for as long as he lives there. As a condition he may have to continue to maintain the home in order to maintain the life estate.
  2. Protection of benefits: Tom has been on SSDI disability for a number of years, and counts on his monthly payments to get by. If his mother’s house, is kept in his and Anna’s name as joint owners he risks losing that monthly income. Instead, Anna may transfer her interest to Tom as a life estate.
  3. Protection for whatever the future brings: Tom knows that at some point in time, as his health declines, he’ll need to move into long term care (e.g., a nursing home or assisted living facility) because he’ll need assistance with activities of daily living (e.g., getting in and out of his wheelchair, showering, and using the bathroom). If he is not an owner of 101 Peachtree, and has no other assets to speak of, and doesn’t need to move into a long term care facility for another five years, he could qualify for Medicaid because his five-year look-back period would, at that point, be clear.

A life estate doesn’t have to be created for just family members. It can protect the home base for anyone. For example, my client Linda lives in her partner Karen’s home. Karen owns the home in which they live. Karen has created a life estate for Linda, should Karen pre-decease her, so that Linda may continue living in their home. Depending upon the terms of the life estate, Linda can live there either for the rest of her life, until she chooses to live elsewhere, or for a set amount of time, such as one year after Karen dies.

Nobody wants to think about death and dying, least of all while we are healthy and vital men and women. But if we take care of the uncomfortable things now while we are comfortable, things will be easier when the inevitable happens.

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About Leonard Schwartz

Leonard T. Schwartz, Esq. co-founded full service law firm Slotnick & Schwartz of Williamstown in 1981. His focus is on family law, as well as business, real estate and zoning law.

2 thoughts on “The Lifeline that a Life Estate Can Provide

  1. Rob Klein

    Very good piece… some interesting planning to protect the parties involved. What scares the pants off of me and what my peers in the financial services industry refuse to acknowledge, are all the rule changes with Medicare and Medicaid.

    Medicare is not free and means tested. The higher your income, the greater your cost. That also means the less Social security you have. In the case of Medicaid, you have to be super careful of the Recovery Act, which has more teeth under Obamacare, and the filial support laws.

  2. len schwartz

    Thanks for the comment Rob. I wish there was more space to go into the Medicare, Medicaid, Obamacare issues. Maybe another time. In the meantime, a life estate deed provides one way to dispose of property while still alive. Most importantly, it protects the person living in the home from being thrown out against their will.


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