When individuals own a home or other types of real estate, they may want to one day pass it on to a beneficiary yet still live on the property. Quicken Loans notes that a life estate can allow both circumstances to exist at once.
Creating a life estate may offer both the current and future owners several benefits, no matter when the transfer of property may take place.
When two parties sign a life estate, each agrees that the current owner has use of a property until he or she dies. Upon that death, the home passes to the other individual as long as he or she meets all the requirements of the life estate document. This can help the beneficiary avoid a lengthy probate process, which can take months to complete when it becomes unclear who the deceased intended to pass the property to.
Once two people sign a life estate agreement, they enter into joint ownership of a property. The current owner retains certain rights and responsibilities, such as the right to live in the home and become a life tenant. However, the beneficiary also takes on certain rights and the life tenant must seek consent from that individual if he or she wants to make any major changes to the home, take out a mortgage or sell the property. This joint ownership protects both parties.
A life estate can also prevent estate costs after the death of the life tenant, as it passes to the beneficiary upon the tenant’s death. As such, it is not part of the estate and remains in the hands of the heir.