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  1. #1

    Default Can You End a Life Estate to Instead Put the Property Into a Living Trust

    My question involves proceedings in Shasta County in the sate of California:

    Back in the 1990's my mother set up a Life Estate, and gave her home to me, allowing her to remain there the rest of her life. We under the impression that what was basically set up was a Homestead. My mother is advanced in age now, unable to liver on her own so my wife and I took her into our home. We wanted to sell this to our children (my mother's wishes as well), but cannot with this Life Estate in effect. This came to light when recently we tried to get a Living Trust. The attorney told us that Life Estate and Living Trust were much the same, and to keep the Life Estate in force.

    After looking into the matter ourselves, we all want to get out of the Life Estate ASAP. I know about the setting up of a Living Trust, but I am just interested in focusing on terminating the Life Estate. My mother and I both agree the Life Estate needs to be terminated, but those we've talked to say either being a "Life" Estate means its irrevocable, while others say it's just a big headache to terminate. I'm doubtful that it's irrevocable, and whether it's a headache or not, we need to get it done.

    I would appreciate if someone could at least provide the steps of what is required to terminate the Life Estate so we can put the property into a Living Trust. Thank you for any help.

  2. #2
    Join Date
    Jul 2018
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    Default Re: End Life Estate to Make Way for Living Trust

    Quote Quoting MountainDave
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    I would appreciate if someone could at least provide the steps of what is required to terminate the Life Estate so we can put the property into a Living Trust.
    Terminating the life estate simply requires that your mother and you deed your interests in the property to a single individual (your mother or you or anyone else) or multiple individuals. If your intent is to put title to the property into a trust, the lawyer who sets up the trust should be able to handle this without any difficulty.

  3. #3
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    Sep 2010
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    Default Re: End Life Estate to Make Way for Living Trust

    Not too many people are interested in buying a property that's only got a remainder interest.

    A life estate and a living trust aren't "pretty much the same thing." Either the lawyer is a complete idiot or you misunderstood. A living trust would have your mother control of the property with a easy transition if she dies.

    However, you and your mother should get to a proper elder law attorney before you further muck things up. You screw around with this and you can disqualify her for medicaid services she might need. You've already realized that she might actually need to sell the house to live. Furhter, willy-nilly deeding of things could have serious tax consequences and may not even end up being valid.

  4. #4
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    Jul 2018
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    Default Re: End Life Estate to Make Way for Living Trust

    No one (or almost no one) would be interested in buying only the life tenant's life estate interest. However, the OP stated that he believes the home can't be sold -- something both he (as the remainderman) and his mother (as the life tenant) want -- because of the life estate, and that's not true. If a buyer were to receive deeds for both the life tenant's life estate interest and the remainderman's interest, then the buyer would have a fee simple interest. It's not at all difficult.

  5. #5

    Default Re: End Life Estate to Make Way for Living Trust

    Sorry, I hoped that context would explain the identity of "us" and we". I was wrong.

    It is true that in the 1990's the attorney brought in by the local Senior Services likened a Life Estate to a Homestead.

    It is also true that last week another attorney told us (my wife, my mother, and me), to keep the Life Estate, because 'the [two] accomplished much the same objective'.


    Back in the 1990's when the Life Estate was drawn up I remembered feeling good about my mom being set up in a good way, but just had the inkling it was going to mean extra $ from me after sale of the property down the road (I feel now that the local Senior Services certainly had the interests of Seniors in mind, but not necessarily the best interest of their heirs).

    I see that now - capital gains! As opposed to inheriting it through a Living Trust. Last week's attorney did not explain this at all, or anything about a Life Estate vs. a Living Trust.

    No, we need to end the Life Estate ASAP, I see that now, and get that Living Trust to protect the interest in the property and all those involved.


    Thank you

  6. #6
    Join Date
    Jan 2006
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    38,867

    Default Re: End Life Estate to Make Way for Living Trust

    Yo do realize that the tax issue is already not what would have had if she hadn’t created a life estate. It’s already your house.

    Before you go any further i believe you need to speak to a tax consultant.

    Taxing matters may be able shed some light on the tax issues as well.

  7. #7

    Default Re: End Life Estate to Make Way for Living Trust

    Oh, and my mother has Medicare, and Part B and Part N supplementary insurance if that is affected by, or affects anything living with us.

    In the Living Trust, however it works I would no longer be the "owner". If the property is sold, the monies made would remain in the Trust, and then be inherited later.

    None of this the recent attorney broached, asked about or explained.


    Thank you.

    There is not much to my mother's property. It may get $120,0000 to open $140,000 on the market. She has a checking account with a very small sum, and an eight-year-old car. Everything together totals less than $150,000. Separate from that total she has an annuity less than $100,000, and I am the beneficiary. Yes, she has a few possessions in her room where she lives with us now, but had to sell off and give away everything else to move in with us. That money is going in to maintenance of her house in the Estate while she is out of it.


    So what she owns is pretty minimal.


    Thank you.

  8. #8
    Join Date
    Oct 2006
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    16,474

    Default Re: End Life Estate to Make Way for Living Trust

    If you want to sell the home to your children and you and mom are in agreement, then why don't you just do that? You sell your interest, mom sells her interest and everything is fine. Why try to muck around with a living trust? Why not just sell the property and wash your hands of it? Mom banks her share of the money in case she needs it for future care, and you do whatever you want with your share?

    Yes, you will have capital gains tax to deal with, but its too late to avoid that now.

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