Anyone know? Life Estate interest in divorce. . .

[nextwife]

What is the name of your state (only U.S. law)?

A question in another forum got me thinking. A college aged kid was proposing having his parents deed he and sibs their home (to "avoid inheritance tax, blah, blah, blah), and the kids would protect them via a life estate. The parents were only in their 40s!

Theoretically, if a couple no longer owns the marital household, but jointly retains a life estate, then later divorces, HOW in heaven's name, would the use and occupancy of the marital home be addressed? The ownership of the property would have already been exchanged for a lifetime assurance of occupancy, yet two individuals cannot continue to cohabitate after divorce, nor do they wish to do so.

Anyone ever come across this? I did some searching online, but found little.

 

[LdiJ]

What is the name of your state (only U.S. law)?

A question in another forum got me thinking. A college aged kid was proposing having his parents deed he and sibs their home (to "avoid inheritance tax, blah, blah, blah), and the kids would protect them via a life estate. The parents were only in their 40s!

Theoretically, if a couple no longer owns the marital household, but jointly retains a life estate, then later divorces, HOW in heaven's name, would the use and occupancy of the marital home be addressed? The ownership of the property would have already been exchanged for a lifetime assurance of occupancy, yet two individuals cannot continue to cohabitate after divorce, nor do they wish to do so.

Anyone ever come across this? I did some searching online, but found little.

I have no idea how they would handle that, but the whole idea is stupid. It might avoid some state inheritance tax, but when the kids went to sell the home, there would likely be huge capital gains taxes because they would not get a stepped up basis.

 

[nextwife]

I have no idea how they would handle that, but the whole idea is stupid. It might avoid some state inheritance tax, but when the kids went to sell the home, there would likely be huge capital gains taxes because they would not get a stepped up basis.

Well, the idea is stupid for a whole bunch of other reasons as well, including that any of the three sibs could be sued, end up with a judgment, tax or child support lien, and so on. Regardless, we've seen people on these forums who have done really stupid things, so it's not out of reality to presume someone could enter into such an agreement

 

[LdiJ]

Well, the idea is stupid for a whole bunch of other reasons as well, including that any of the three sibs could be sued, end up with a judgment, tax or child support lien, and so on. Regardless, we've seen people on these forums who have done really stupid things, so it's not out of reality to presume someone could enter into such an agreement

Well, that's true. I assume that the life estate would have to be assigned a value, and that half of the value of the life estate would have to be paid to the spouse not retaining the right to occupy the home, by the other.

 

[Ohiogal]

What is the name of your state (only U.S. law)?

A question in another forum got me thinking. A college aged kid was proposing having his parents deed he and sibs their home (to "avoid inheritance tax, blah, blah, blah), and the kids would protect them via a life estate. The parents were only in their 40s!

Theoretically, if a couple no longer owns the marital household, but jointly retains a life estate, then later divorces, HOW in heaven's name, would the use and occupancy of the marital home be addressed? The ownership of the property would have already been exchanged for a lifetime assurance of occupancy, yet two individuals cannot continue to cohabitate after divorce, nor do they wish to do so.

Anyone ever come across this? I did some searching online, but found little.

A life estate has a monetary value and it can be determined. It is not the easiest thing in the world but it is very possible to attach a monetary value to a life estate interest. There are many court cases regarding valuing life estates -- usually brought about due to wasting suits. So basically one would be "bought out" of their share. And the other would be granted sole possession.

 

[tranquility]

I agree with ohiogal, this is not a bizzare situation. Life estate is a quantifiable interest in property. There could be argument, sure. But, it is not something beyond reality. Give the specific facts and we can help give the answer.

 

[LdiJ]

I agree with ohiogal, this is not a bizzare situation. Life estate is a quantifiable interest in property. There could be argument, sure. But, it is not something beyond reality. Give the specific facts and we can help give the answer.

Its not unusual per say, but the case Nextwife was referring to had the owners of the home only being in their 40's and their college aged children wanting them to turn over the house to them and take a life estate. That one IS a bit bizzare.

 

[tranquility]

As to if it accomplishes the principal's goals is an entirely different question. That's what appointments are for.

 

[nextwife]

A life estate has a monetary value and it can be determined. It is not the easiest thing in the world but it is very possible to attach a monetary value to a life estate interest. There are many court cases regarding valuing life estates -- usually brought about due to wasting suits. So basically one would be "bought out" of their share. And the other would be granted sole possession.

However, the value of the life estate is very different if one spouse lives to be 48 and the other lives to be 90. And, what if the neither spouse has sufficient resources to reimburse the other spouse for the cost of housing they are now incurring that neither of them were supposed to incur any longer (beyond taxes and maintenance

 

[mistoffolees]

A life estate has a monetary value and it can be determined. It is not the easiest thing in the world but it is very possible to attach a monetary value to a life estate interest. There are many court cases regarding valuing life estates -- usually brought about due to wasting suits. So basically one would be "bought out" of their share. And the other would be granted sole possession.

That answer seems to be correct, but just to make sure OP understands. Neither parent has grounds for action against the kids. The divorce court can not order the kids to do anything.

The issue is how much the spouse who remains there owes the other spouse.

 

[Ohiogal]

However, the value of the life estate is very different if one spouse lives to be 48 and the other lives to be 90. And, what if the neither spouse has sufficient resources to reimburse the other spouse for the cost of housing they are now incurring that neither of them were supposed to incur any longer (beyond taxes and maintenance

Actually no because it is based on quantifable averages and there are several formulas that are put into play -- think actuarial tables for life insurance. Are they exact? No. But they are quantifiable.