Life estates for your family home are silly

 
Life estates are silly and old fashioned. You should instead leave everything as a percentage. If you want to benefit one particular person then increase their percentage. Therefore, your Residuary Beneficiaries will work out what they want to do with your estate. Life estates are just a prison sentence. Life estates are commonly put in place by people that want to rule from the grave, and that is a dangerous practice.

STAY AT HOME CHILD

Young Jonny has looked after his ageing mum. His siblings selfishly got married, had children and lived a life. So Jonny gets a special reward. After her death, mum allows Jonny to live in the family home until he leaves or dies.

Sweet as that all sounds, that is a mess and a recipe for disaster.

1. Before death, mum suffers a stroke. She is moved into a nursing home. Mum is of unsound mind and the government/children sell the family home. It now attracts Capital Gains Tax and Land Tax. Poor Jonny misses out.

2. Or, at mum's death, Jonny is now stuck in the house. Jonny wants to see the world and get a life - but he has no money. He just has an old house to wander around in. Perhaps, Jonny wants to get a smaller newer apartment. He can't. He is trapped in a big ageing house that no one has any interest in looking after.

Instead, Mum should increase the percentage that Jonny gets from her estate. For example, Jonny gets 50% of the estate and his brother and sister get 25% each. Jonny is free to use his 50% of mum's estate as he sees fit. He is not tied down.

HOT SECOND HUSBAND

82-year-old Mavis finds a 48-year-old toy boy at her Bridge Club. He is not bright. He is not wealthy. But he is a lot of fun and as handsome as sin. Mavis, in her Will, gives a life estate to this young fellow. Maybe they got married, maybe they just lived together. It makes no difference.

Mavis dies. The toy boy is now stuck in a big house. He can't sell it. He can't maintain it. He suffers a stroke and moves into a cheap retirement home because he has no money. The house is left derelict.

Instead, Mavis should have left a percentage of her estate to the toy boy. He is then free to use the money to enjoy his life.

If you are not convinced then here are the clauses to use in the Specific Gift.

RIGHT TO RESIDE

[Toy Boy Full Name] exclusive right to live in [10 Current Street, Suburb] or any home that I own at the date of my death for life or until [Toy Boy Full Name] stops living in the property for more than 6 months, whichever is the earlier. All rates, taxes, insurances and other expenses to be paid by [Toy Boy Full Name]. The property to be maintained in a clean and tidy state by [Toy Boy Full Name].

LIFE ESTATE

[Toy Boy Full Name] a life estate in [10 Current Street, Suburb] or any home that I own at the date of my death for life. All rates, taxes, insurances and other expenses to be paid by [Toy Boy Full Name].

Right to Reside v Life Estate

The Right to Reside can't be sold. The toy boy/stay at home child/hot new 2nd wife loses the right of possession when they stop living in the home. In contrast, the owner of the life estate can rent out the property. The owner of the life estate can even sell the life estate.

For more legal advice telephone us.

Dr Brett Davies, CTA, AIAMA, BJuris, LLB, Dip Ed, BArts(Hons), LLM, MBA, SJD
Legal Consolidated Barristers and Solicitors
Australia wide law firm
39 Stirling Highway, Nedlands, WA (Post Office Box 5169, Dalkeith, WA 6009)
Mobile: 04777-96959
Direct: 08 6389-0400
Reception: 08 6389-0100
Email: brett@legalconsolidated.com
Skype: brettkennethdavies

 

 


 

 

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