With a life estate, a parent can transfer the ownership of his home to his children while reserving the right to live on the property for the rest of his life. The life estate avoids probate as the ownership transfers with the formation of the estate, explains Lawyers.com.Continue Reading
In this process, the parent becomes the life tenant and the heir becomes the remainderman. Both tenant and remainderman are co-owners of the property, according to Lawyers.com. The tenant maintains responsibility for taxes, repairs and any mortgage payment as long as he lives. His rights to the property cease at his death.
The life estate causes some difficulties if the parent has a change of plans after establishing it. Selling the property requires the agreement of the remainderman. If the property requires major repairs, the tenant no longer has the right to borrow money against any equity built in the home without the remainderman���s agreement, states Lawyers.com. The life estate has limited ways of escaping its consequences without the approval of the remainderman. Because the tenant and the remainderman do not own the property at the same time, the courts are unable to order it divided between the owners. The only way to undo the life estate, which is created by deed, is by the agreement of all parties involved in the estate.Learn more about Financial Planning