Life Estate

What Happens When Unmarried Couples Don’t Have Wills?

Estate planning for unmarried couples is even more important than for married couples.

There can be serious problems when people live together without the benefit of marriage. One is that they don’t have any legal right to make medical decisions for each other. Another is that without any will or estate plan in place, the surviving partner has no legal right to any of the decedent’s property. That’s just for starters, explains the article “Longtime unmarried couple hasn’t planned for future” from the Santa Cruz Sentinel.

The unmarried couple may be pleased with their decision to live on their own terms.  However, by not creating an estate plan an unmarried couple is creating unnecessary difficulty for their loved ones. The children and grandchildren of the couple are likely going to end up having to sort out the mess, after one of the couple dies. They may end up in court, battling over the house or other assets.

If the couple wants their property to end up in the hands of their children when they pass away, having no estate plan is not the way to make that happen. When one spouse dies, any assets they own in joint tenancy will go to the surviving partner. When the surviving partner passes, those assets will go to their children, and nothing will be passed to the other family.

The surviving partner will have no legal right to the assets of the deceased partner, other than any that have been titled to joint tenancy. There is no community property between cohabitating couples, unless they have registered as domestic partners. This is how the law works in California, and every state has its own rules. Assets owned by the deceased partner that are titled in his or her name only, belong to the decedent’s probate estate and will pass to their children. If the gentleman dies first, in this example, will his companion be left homeless?

This is a situation that can be easily remedied with thoughtful estate planning for unmarried couples by creating wills and trusts that clearly spell out how they want their assets to be distributed upon death. There are many different ways to make this happen, but they will need to work with an estate planning attorney. Where the surviving non-homeowner will live after the homeowner dies is a serious issue, unless other plans have been made. One way to do this is to leave a life estate in the home in his will, or by creating a trust that holds the home for her use. When the survivor passes away, the home can then pass to the homeowner’s children. In that case, a series of agreements about how the home will be maintained may need to be created.

Taking the time and making the investment in an estate plan, is for the benefit of the individual and the family. An indifferent attitude about the future is hurtful to those who are left behind.

Reference: Santa Cruz Sentinel (April 7, 2019) “Longtime unmarried couple hasn’t planned for future”

What is a Life Estate?

Life Estate Deed
Proper use of a Life Estate Deed allows the transfer of property after death without probate court intervention.

The question of a life estate may arise, when adult children are discussing the possibility of moving a parent into an assisted-living facility and selling the family home.

The Spokesman-Review’s recent article asks: “Does a life estate have cash value?”

The article explains that a life estate is a form of co-ownership. A person’s interest in property is limited to his life, with the property passing to other recipients at his death. The person who holds the life estate is called a life tenant, and those who receive the property at the death of the life tenant are called remaindermen.

The life tenant and the remaindermen both have real interests in the property, but unlike other partnerships or other forms of co-ownership, the life tenant and remaindermen don’t have rights in the property at the same time. Only the life tenant has a current right to possession. The remaindermen’s interest doesn’t become activated, until the death of the life tenant.

This is actual form of ownership, rather than a right to use. The life tenant—in many cases the parent—“owns” the house until her death. The parent will need to pay the taxes and keep the property in reasonable condition. The life tenant could sell the property, but the buyer would only have rights until she dies. There would be few people who would ever buy the property. No lender would loan mom money against the property because their interest would go away when the life tenant died.

But there is a value to this type of estate, and upon sale, the life tenant must be compensated for the sale of their interest. These estates are valued using the age of the life tenant and the present fair market value of the property.

Although they typically end when the life tenant (or another specified person) dies, some specify conditions can also trigger termination. These would cause the life estate to be terminated, even though the life tenant is still alive and well. For example, a life estate may terminate, if the life tenant leaves the home for more than six months. The actual life estate document details any conditional limits that define when the life estate terminates.

Talk with an experienced estate planning attorney about whether a life estate makes sense for your situation, or if there are alternative strategies that would be better suited.

Reference: The Spokesman-Review (March 17, 2019) “Does a life estate have cash value?”

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