Under what circumstances would you recommend setting up a life estate?

My mother will be moving in with my wife & myself. She will be selling her house and contributing the bulk of the proceeds from the sell of her house to a new house we will build for the three of us. The question is how to protect her interest and our interest. Since my mother will be contributing the bulk of her estate she needs to know that as long as she lives she will have a home. My wife & I need to be protected from a possible future that may include us not being able to care for her properly and she may need to move to an assisted care facility. We need to be protected from losing our home if this ever occurs. Also to be considered: 1>Rights of survivorship for all three parties. 2>Reducing taxes that may result from the transactions that may occur to make all this happen.

Public Comments

1. See an Attorney.
2. A life estate is generally used if a person has children from a former marriage & wishes to leave the house or estate to his current spouse, which after her death will pass back to his children. Does she have any other heirs/children to be considered? If she does, it should be Tenancy in Common-her share upon death would pass to all other heirs, including you. If you have siblings, they're not going to be happy when their mother's estate passes to the 2 of you(Jt Ten with Survivorship). If there are no other siblings or heirs and you're concerned about needed assisted living for her, I'd put the house in your & your wife's name and not keep it as an asset of hers so she can use Medicaid at some point. If Medicaid is not something you want her to use(it will limit choices somewhat), she should have long term healthcare insurance. Taxes-chances are she won't need the writeoff like you will. Maybe a separate agreement between the three of you so your Mom doesn't feel insecure?
3. It is important to know what state you are in. You should put the house in your name for medicade purposes and give her a right of use. But this kind of stuff varies by state. may want to do a medicade trust. For something like this you MUST consult a lawyer. Best to try to find an elder law lawyer or estate planning lawyer.
4. I don't feel the life estate is the way to go for your situation because of what you fear--losing the home because of her medical bills or going to an ACLF. In fact, she would find it very hard to get treatment or assistance BECAUSE of her assets being tied up in a life estate. Even if she were the grantor, they wouldn't want to only have a third of the property in exchange for caring for her. A third is nothing. They can't sell it or do anything with it until you and your wife are deceased. Some companies do not want the liability or the legal entanglement in that scenario. And would you want the ACLF corp to wind up with everything after you and your wife are gone? They're a corp, they could certainly "outlive" you. 've been trying to undo a screwed up life estate scenario dating back fifteen years for several elderly survivors, for about four years now, and no longer feel it's the way to go for any circumstance. It all boils down to who dies last, and that person winds up inheriting a lot of headaches if the documentation isn't absolutely perfect. I've also discovered there are VERY few lawyers who know how to do these properly, or enforce them if there are problems, or even answer basic questions. Most rural attorneys will not touch a family situation like this, and the big city guys want a huge fee. If you're asking the question on Yahoo, I'm assuming you don't have megabucks for a millionaire attorney. The life estate I'm involved with was also set up between four people so that they would all have a place to live and be secure, and wound up being a major nightmare for the last two involved thanks to the grantor being a victim of a "caring family" from her church. Who is going to grant you the life estate rights of survivorship? Your mom? Did you know that as the grantor, she can sell her own remainder rights to ANYone else? Someone could influence or coerce her into doing so for a sum of money. She might feel that's the smart thing to do at the time and helpful to you-you never know. If your mom sold or had to give up her third, you and your wife would be allowed to stay on the property for the rest of your lives, but you would never own it outright, can't borrow against it, or be able to leave it to the persons of your choice (if you have kids.) And if you pre-decease your wife, and she remarries, is her new spouse going to care for your mother's rights as you would? Your mom would only have protection if she remains the grantor, and of sound mind and body. You can't guarantee her safety or well-being if you pre-decease her. As for taxes, forget it. Those of down here at the bottom don't get breaks from the IRS. They want your blood, period. I could go on and on about death and taxes, but if you know someone who has recently gone through losing a parent, ask them for recommendations for an attorney. They may not be willing to divulge details of their probate ordeal, but I bet they will tell you what NOT to do, or which attorney to stay away from. The three of you need to consult a very good attorney. or even start with an experienced CPA. They know more about taxes than most attorneys. Count on this: Don't assume Mom will be the first one to need care, or that she will pre-decease you. You can't prepare for every scenario, and you can't beat IRS. Good luck to you.