Life Estates – What are they? What are the Pro’s & Con’s of having one?
If someone receives a Life Estate under a Will it means that they have the right to possession and enjoyment of property, including income from property, for the duration of their life. A Life Estate is usually created to allow a person to live in a property until their death at which time the property will vest in a person or class of persons named in the Will (called the “remainderman”).
There are many positives to the creation of a Life Estate under a Will. In a time of complex family arrangements a life estate can be used to ensure that the property of the deceased goes to children from a previous marriage whilst also allowing their current spouse the benefit of the property and income derived from the property. For example Ted had three children from his first marriage. When he and Mary got married they decided to sell Mary’s house and live in Ted’s house. Mary kept the proceeds of the sale from her house and made several gifts to family and friends. Ted and Mary agreed that if Ted died first Mary would have the right to reside in the house until her death and after her death the proceeds of sale of the house would be divided equally between Ted’s three children.
There are also negatives involved in the creation of a Life Estate. Going back to Ted and Mary above difficulties may arise if the relationship between Mary and Ted’s children is not amicable. In effect, Ted’s children will have no ability to deal with the property until Mary’s death unless an agreement is reached between themselves to sell the property to a third party.
Of more importance is that the creation of a Life Estate for a spouse may give rise to an application by the spouse for a family provision order on the basis that the Life Estate is an inadequate provision for their proper maintenance and support.
If you are interested in the creation of a Life Estate it is important that you talk to a legal specialist in Wills and Estates about the positives and the negatives of Life Estates. Our expert Wills and Estate Lawyers have advised numerous clients on the advantages and disadvantages of Life Estates including an honest appraisal of whether a Life Estate was appropriate in the client’s circumstances.
At Heckenberg Lawyers we don’t take our clients’ confidence for granted: we work hard to earn it by providing an efficient, cost effective service which puts your interests first and doesn’t cut corners. We take pride in achieving repeat custom and winning clients by word of mouth recommendation.
If you need advice about a Will or an Estate matter please talk to our Estate Planning Lawyers Sydney or call 02 9221 2779 or email firstname.lastname@example.org you’ll be glad you did!