Life Estates in Massachusetts
Life Estates in Massachusetts: A Guide to Real Estate PlanningIf you're looking for a simple and effective way to determine the future of your real estate while maintaining control and use during your lifetime, a life estate might be the solution for you. In this article, we'll explore what a life estate is, how it's created, its benefits and drawbacks, and how it can fit into your estate planning strategy.
What is a Life Estate and How is it CreatedA life estate is a legal right that grants you, as the property owner, the ability to use and occupy the real property for the duration of your lifetime, but still transfer ownership to the person you want to have the property after your death.
As the "life tenant," you also retain the right to receive a portion of the property's value if it is sold. However, selling or mortgaging the property typically requires the consent of the "remainderman," the person to whom the property will ultimately pass after your lifetime. To create a life estate, you'll need to execute a life estate deed that transfers the property to the remainderman while specifying your interest during your lifetime. This deed establishes both your life estate interest and the remainder interest of the designated person(s). The process is quite similar to a standard property deed, with the addition of a sentence at the end reserving the life estate for the current owners, usually you and your spouse. Life Estates and Planning for Assisted LivingOne common reason for utilizing life estates is to protect your home from the potentially significant costs of assisted living. Medicaid, known as MassHealth in Massachusetts, can provide financial assistance for assisted living if you meet the necessary financial qualifications. Reducing your "countable assets" by transferring real property can accelerate your eligibility for this assistance.
There are various methods to achieve this goal, such as establishing an irrevocable trust designed to meet Medicaid standards or using a life estate deed. It's important to note that MassHealth will still assign a value to your life estate when assessing your available assets for care payment purposes. The specific percentage of the property's value depends on your age, as determined by MassHealth's tables, potentially affecting your eligibility for benefits. |
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Life Estates as an Estate Planning Tool
A life estate can help you bypass the probate process for the property, but it won't remove the property from your estate for estate tax purposes. Compared to irrevocable trusts, life estates provide less control over property distribution. When you pass away, title automatically transfers to the remainderman, which may lead to unintended complications.
For instance, if you've deeded the property to your child and they pass away before you, their remainder interest becomes part of their estate, subject to their will or intestacy laws of their state. This could result in a prolonged probate process and the property passing to someone outside of your family, contrary to your intentions.
Furthermore, your remainderman's interest in the property can be vulnerable to creditors or divorce settlements. In contrast, trusts offer greater specificity and flexibility, enabling you to dictate the property's fate even if your beneficiaries pass away before you.
For instance, if you've deeded the property to your child and they pass away before you, their remainder interest becomes part of their estate, subject to their will or intestacy laws of their state. This could result in a prolonged probate process and the property passing to someone outside of your family, contrary to your intentions.
Furthermore, your remainderman's interest in the property can be vulnerable to creditors or divorce settlements. In contrast, trusts offer greater specificity and flexibility, enabling you to dictate the property's fate even if your beneficiaries pass away before you.
Consider All Estate Planning Tools
While transferring your interest in your home through a life estate deed can be a valuable strategy, it's just one of many estate planning tools at your disposal. Consult with an experienced estate planning attorney to assess your family and financial situation thoroughly. You may find that a life estate fits your goals perfectly, or you may discover that a combination of wills, trusts, and other strategies is better suited to achieve your desired outcome.
How Our Estate Planning Lawyers Can Help
Life estates in Massachusetts offer a valuable option for real estate planning, but it's essential to weigh the pros and cons carefully and explore alternative strategies to ensure your estate plans align with your objectives and protect your family's future. We are ready to help. You can use the button below to schedule a free information call, or simply give us a call at 781-784-2322.
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