Tennessee residents have a lot of options for handling their estate plans. One lesser-known way to handle your estate plan is setting up a life estate.
What is a life estate?
A life estate is a real estate property where the owner lives until they pass. After their death, their beneficiaries or successors will inherit the property and everything in it.
This is a great way to avoid probate and simplify the estate planning process. Instead of listing individual belongings in a will, it’s easier to say that your house and everything in it will be passed down to your next of kin.
What is the process for creating a life estate?
A life estate is a legal contract or deed that would be created by a real estate attorney. The life tenant, or owner of the property, would remain in control of the property until the end of their life.
After they pass, the deed is set up to automatically transfer ownership to the person’s children or beneficiaries. This person would be referred to as the remainderman.
What are the cons of life estates?
While the life tenant will still have full ownership over the property, if they wanted to make any significant changes, they would need to get the permission of the remainderman. This is because the remainderman is still considered a majority owner.
The life tenant would also be responsible for all of the expenses and upkeep of the property. If the life tenant changes their mind about the life estate, it’s also very difficult to undo – and the remainderman might still have to pay taxes on it.
This is just the beginning of what you have to consider when you consider using a life estate. Ultimately, it’s up to you and your beneficiaries to decide what’s right for your estate plan.