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When creating an estate plan, the options that are laid before you are seemingly limitless. A good estate planning attorney will explain all of your choices in detail and help guide you to make the decisions that will accomplish your goals. One estate planning tool that you might consider is known as a life estate. A life estate is a legal arrangement wherein your interest in real estate is transferred automatically to someone else when you die. It is a form of co-ownership. Both the life tenant and the remainderman have real interests in the property; however, those interests do not occur at the same time.

How Does a Life Estate Work?

As you learn more about life estates, you may wonder how exactly this estate planning tool works. The following is a simplified overview of the process:

  1. You, as the owner of the property, deed the property to someone else while reserving a life estate for yourself. You are known as the life tenant.
  2. During your lifetime, you maintain the right to use and live on the property.
  3. When you pass away, ownership of the property passes completely to another person. This individual is known as the remainderman.
  4. Depending on the way the deed was written, the remainderman could potentially lose part or all of his interest in the property. This could happen if the remainderman dies before you, or if additional people were added to the deed.
  5. The property typically is not included in your probate estate.

Like any other estate planning mechanism, life estates have consequences and should be entered into only after great thought. If you are interested in learning more about the latest tools for planning your estate in Anaheim, we encourage you to sign up for our free newsletter today!

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