One of the many benefits of creating wills and trusts in Colorado is being able to choose who inherits your property after you die. While you are in the midst of updating your estate plans, you may be asking yourself – do I need a life estate? After all, your assets may include some real estate that you want to keep in the family.
According to The Motley Fool, a life estate can be very advantageous if you intend to pass your house on to a family member while you are still alive. This is because it simplifies the transfer process so that probate court does not have to get involved. Creating a life estate may affect your eligibility for Medicaid in the future, but it can also help to keep Medicaid from placing a lien on it. You may be able to avoid Medicaid’s anti-transfer rules relating to the family home by creating your life estate at least five years before you anticipate applying for the government benefit.
Once a life estate is created, the person that you have chosen to become the future owner of your home becomes a remaining interest holder. This means they gain full legal possession of the property and the deed after you die. As the life estate holder, you are limited in what you can do with your house. For instance, you need to receive permission from the remaining interest holder if you want to sell your home. You are free to rent the house out to others or to live in it rent-free, but you are still responsible for all taxes and maintenance costs that are associated with the property.
The rules surrounding life estates can be very complex. However, a life estate can also be a very useful tool to protect your property and your relatives from probate after you die. This information is only intended as educational material and should not be used as legal advice.