Inheritances of Property Arrangements and the Life Estate
When you create a trust, you’re required to name who will inherit your property after you die. But if you want to leave something aside for someone else, even if they are not in your will, there are several different ways of arranging this. You might also want to consider leaving money or property directly to an heir rather than through the trust. Here’s what happens when someone dies with a life estate:
What is a life estate?
A life estate is a limited interest in property that terminates upon the death of the person who holds the interest. The holder of a life estate is called a tenant for life, and he or she has no right to sell or otherwise dispose of the property during his or her lifetime. Instead, this right passes through inheritance when he/she dies (known as “dying into” an estate).
The property itself is held for another person’s benefit–usually one’s children or grandchildren–and not for one’s own use during his/her lifetime; so it may not be used as collateral for loans or mortgages from banks. As long as there are descendants who can inherit at least part of your estate after your death, however; then you must continue paying taxes on any income generated by investments made within such accounts until those individuals reach age 18 years old (or some other age set forth by state law).
When must the owner of the life estate be a named beneficiary in the trust?
When must …
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