A living trust allows the settlor (the owner of the property) to change the beneficiaries at any point because it is revocable, so it can be a very useful estate planning tool. For a living trust, the trust is basically its own legal entity- the trustee (who can also be the settlor) and the trust are named as the legal owner of the property that is listed on the Schedule of Assets, and this property will all be distributed according to the terms of the trust when the settlor passes and the successor trustee takes over the trust.
The trust also helps avoid probate, a timely (around 1-2 years) and costly ( approximately 3-4% of the assets of the estate goes to the cost of probate) and public proceeding (it is all a matter of public record).
A trust also negates the need for a power of attorney or conservatorship as that is all addressed in the trust document.
Also, when a person names a person as heir to an inheritance, that person receives a "stepped up basis" for capital gains purposes, so they receive the property at the fair market value on the death of the owner, which basically wipes out any prior capital gain. This applies for both trusts and life estates.
A concern for many people with a life estate is that the creditors of the remaindermen (the person who will own it after the life estate is over) can still access that property during the life of the life tenant. This is because the ownership is being transferred to some extent immediately (it is a recognized and quantifiable property interest).
If the life tenant requires nursing home care within five years of signing a deed reserving a life estate, they would have to privately pay for this care until the remaining penalty period ended or the remaindermen would have to deed the property back in order to “cure” (correct) the gift.
If after the five year period the person is later admitted to a nursing home and receive Medicaid benefits, the Medicaid office will place a lien on the life estate for the value of services rendered. This lien is released upon death which leaves the remainderman's interest unaffected.
So as you can see there are many considerations;
I find from personal experience that estate planning is one of those areas of the law where one is almost guaranteed to get any legal fees spent in estate planning back in spades; a good estate plan takes several hours of working closely with an attorney to examine which situation is best for the individual, based on expected needs (ie nursing home care), the needs of any special needs adult children, concerns re: possible divorce issues with adult children, etc.
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Information provided is for educational purposes only. Consultation with a personal attorney is always recommended so your particular facts may be considered. Thank you and take care.