This topic is an example of how it pays to have some knowledge of more than one area of the law, since it crosses several borders from one practice area to another.
It has become a fairly common tactic for elderly people to transfer ownership of their home or farm to their children, and to keep a life estate. In other words, the children are given a deed which gives them ownership but provides that as long as the parents live, they retain possession of the property. People do this because besides avoiding probate, they hope it may help keep the property away from the state in the event that the parents wind up in a nursing home receiving Medicaid.
I cannot state more strongly how in my experience this has almost always turned out to be a bad idea. There is a waiting period of several years before it helps with the Medicaid issue, and most folks never wind up on Medicaid anyhow. Meanwhile, this is a non-exempt asset which any creditor with a judgment may be able to attach. Or in the event that one of the children has a bankruptcy or divorce, this is an asset that gets all tied up in those processes.
Just for good measure, if one of the children has a problem with the IRS or the Department of Revenue, this creates a handy asset for the tax men to grab.
My advice to most older people who may be thinking about this: keep your home ownership, keep your dignity; the problems you are about to create may be much worse than the possible aniticpated problem you are trying to solve.
6 Replies to “Life Estates: An Idea from Hell”
A life estate is an ideas from hell. That is what I and my husband discovered only days after we got married. His attorney failed to explain the disadvantages of this transaction and his adult children told him little or nothing. In fact we didn't find out until four days after our masrriage in May of 2007 His daughter- in-law said it had to be done to make him medicaid eligible. At a time when we should have been on our honeymoon I was crying after having discovered that I could be evicted the moment he was placed in a nursing home. According to the terms of the life estate deed his adult children are supposed to be taking care of his needs and also paying for needed repairs to the home. After going back to talk to his attorney he (my husband) discovers that the special warranties of the deed do not have to be upheld and that the children do not have to honor them even though it is the attorney who created the document in the first place. In other words the kids get the house, I will get the boot, and the deed is some kind of cruel joke. Someone needs to explain how these children can get away with this and how this attorney could get away with not explaining other options with my husband. The attorney also knew that the children didn't even live near my husband. How could they possibly take care of him? I loved this article…. I give it a 4 star rating!!!!!
Most seniors make this decision much to soon after losing a spouse. They feel compelled to leave their children their property and are afraid that no one will take care of them.They are truly convinced at a time when they are most vulnerable. I know of quite a few seniors that have been convinced that this is the best way to handle their estate. Sadly most of them don't know that the only way to change such a document is to get all of the heirs to agree.Imagine what a nightmare this can be if they refuse. Most discover much too late that there are other options which would allow them to maintain ownership and the ability to change it in the event that they might decide to remarry or their children treated them badly. They do indeed lose their dignity, and in many cases it is the children who are the "wolves in sheeps clothing".
Looks like I hit a nerve with this posting. The life estate idea in my experience tends to be a solution that creates problems worse than those it is intended to solve. There are lots of things in life and law like that. Unnecessary surgery comes to mind.
In fact, I just cancelled a round of tests and appointments with a surgeon who I would say was a bit too anxious to cut. I am feeling much better on my own, as a result of what the insurance adjusters used to call "tincture of time."
It worked great in our case on one side.Guess it depends on how your relatives were raised and how trustworthy they are. I guess I'd rather have the kids get it than have the nursing home get it.
Thanks for the great info. At least now I have enough knowledge to take the initiative to be certain that my children live up to the conditions of the life estate deed. In fact I would have not been so gullible to have signed it over to them in the first place had I have known that it couldn't be changed. All I can say is that my wife must truly love me to have endured the harsh treatment and comments that she has received from several of my adult children. She also took the initiative to have another attorney review the deeds. We discovered several errors which we hope to have resolved in the near future.She said that they (the children) knew that she would bring the "cats out of the bag". I am truly amazed at her ability to see through the phoniness in people.I hsd to face the bitter truth concerning the ulterior motives of my own family, and am most disappointed in their behavior. I hope everyone reads this. Life estate truly is an idea from hell, and that is exactly what we have been through. The best that my children offered my wife for caring for me for more than 4 years was a verbal statement that she would have plenty of time to leave the home upon my passing. I thought I had raised my children with a little more compassion than that. I guess I was mistaken….Thanks for such an honest article. We are fortunate enough to have found a kind elder law/ real estate attorney who is truly kind and caring.
My poor husband. If there is any one out there who has had a similar experince they should definitely comment on this.He has found out just what an idea from hell a life estate really is. Just recently he tried to get his children to live up to the so called promises to take care of him, and to maintain the residence etc…Eight years after the so called life estate deal his children now have challenged the deed saying that they never agreed to it in the first place because they and the attorney conveniently forgot to have them sign the deed of correction. It took quite a lot for my husband to finally see just how greedy his children really are. They have eeven gone to his homeowners insurance co. and tried to change it over to their names behind his back.I tried to tell him months ago that they could not be trusted but he just could not admit the truth. Acoording the them they were the "perfect family". His former attorney let him down as well as his family.He now knows who has always been there through thick and thin, and it wasn't his children. I urge everyone especially the elderly to have their deed checked for any mistakes. Don't trust your attorney or your family. TYhe mistakes they make you will suffer for.this is how my husband will spend his golden years. His adult chidren have been nothing but trouble from the start, and I imagine very upset that someone was actually wise enough to see through their scam. I can't wait for the tax man to start digging into their business and also the insurance company when they have to explain why if they claim to be the rightful owners that they just conveniently commited fraud for several years. They will have to answer to someone. I urge all of you out ther to have some sort of escape clause written into your deed, or to perhaps use the so called super deed which would offer you some sort of protection.