In these days of readily available information, there are many things that a person can figure out for themselves. However, much like auto repair and DIY home repairs, there is the potential to create more damage when we attempt certain tasks without the appropriate expertise. One area in particular that I would recommend getting qualified help is for a person’s estate and personal planning, especially for blended families.
When creating an estate plan for blended families, quite often we will use a tool called a life estate. A life estate is when you leave an asset, for example a house, for a person to use during their lifetime. After that person’s death, the property can be sold and split up between different beneficiaries. Quite often in a second or later in life marriage, the parties may buy a property together, but they intend that investment to go to their respective children when they die. However, when the first spouse dies, they want to avoid having the survivor immediately evicted by the deceased spouse’s children.
Why are life estates important? When a person dies without a will, and without having set out their intention and wishes for co-owned property, quite frequently the survivors end up in a dispute about how and when the property should be sold.
How does a life estate work? A life estate can permit the surviving spouse to live in the property for the remainder of their lifetime. If that does not quite fit your needs, you can also specify any length of time you think is fair. You can set out that they can remain in the house for an occupation period, such as 1 year, 5 years or 10 years. With these shorter occupation periods, you can set out any terms and conditions that are appropriate for your unique situation.
For example, if, before the end of the permitted occupation period, the surviving spouse decides to move, or they are no longer able to remain at home due to ill health, or perhaps they decide to remarry, you can set out that the house is to be sold upon such event. You will also want to set out who is responsible for the costs and maintenance of the home during the life estate or occupation period, such as payment for insurance, taxes, utilities, maintenance and capital repairs. Perhaps you want to include a provision that a particular party has the first option to buy the house. You can even set out dispute resolution procedures if the person permitted to live in the house and the people entitled to the sale proceeds cannot agree on which repairs are necessary, or even which realtor to use.
As with many complex problems, the simplest road to a solution is to speak with a qualified professional. If you think you and your family could benefit from a proper estate plan, think about making an appointment to speak with a wills and trusts lawyer.