When I conduct the initial consultation with my clients, there is an issue that often pops up that I think we should address in this blog entry.
Clients often want to grant someone (sometimes a child or significant other) the right to remain in the primary residence after the clients die. In a recent case, my married clients (who have 3 children) told me they wanted their daughter (who currently resides with them) to be able to remain in their primary residence until she passes away or decides to move out. At that time, the house will be sold and the money divided among all their surviving children. Apparently their daughter had fallen on hard times, separated from her husband, and needed to stay with them.
This raises many interesting questions that should be addressed in the estate plan. If the named beneficiary gets to stay there until they die (should they so choose), we generally call that a "life estate" in the property. Here are several things I discuss with my clients when this issue arises:
1) First, I tell them it's important to outline all the provisions clearly in their living trust so we can avoid arguments that may occur after they die. Perhaps all their children might not be that crazy about giving the daughter the right to live in the property till she passes. After all, doing so would delay their inheritance with respect to the property.
2) I ask if they've discussed this idea with the other beneficiaries. How do they all feel about it?
3) Do they have any sons-in-law or daughters-in-law that may create a problem if they find out about this? After all, it's not only the children of the couple that can be a problem.
4) If their daughter gets to stay in the property, will it be for "life" or perhaps for a period of time (like 5 or 10 years).
5) If their daughter remains in the property, who is going to pay for all the property taxes, upkeep, utilities, and other maintenance of the property? What if they don't pay for those things? What happens then?
Those issues should be outlined clearly and addressed in the living trust. The more specific, the better, as doing so may help prevent arguments later on. Whether you plan on granting a "life estate" or some other similar solution to a specific beneficiary, you should discuss the pros and cons with an estate planning lawyer who can help you think through the various options.