Life Estate?

robins143April 22, 2014

Has anyone had an experience with their parents purchasing a Life Estate in their home? We added an in law onto our house with funds provided by my parents. It has only raised the property value by 1/3 of what the addition cost... We are paying for the final finishing of the outside work and repair to our lawn, fencing and driveway.

If we go with this Life Estate, what happens to our estate if we pass away before my parents? Do our children lose the equity we built in our home? If my parents are sued or run up debts, is my home at risk?
My husband and I both work full time and are their caregivers. They cannot live independently for health reasons anymore.

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I'm not sure what you mean by a "Life Estate". If they want some strings on the money that they gave to do the property improvements, I should think that a lien on the house in that amount would cover that.

    Bookmark   April 22, 2014 at 5:22PM
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Please talk to a lawyer. Free legal advice on the Web is usually worth what it costs you - nothing.

    Bookmark   April 22, 2014 at 5:37PM
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I googled >Life Estate

Here is a link that might be useful: ReadMe

    Bookmark   April 22, 2014 at 11:00PM
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A Life Estate gives the person the right to live in the property until they die. In many states if they must move to a nursing home the house is considered in their assets. If you have not done it? Don't. Just do a promissory note after talking to an attorney.

    Bookmark   April 22, 2014 at 11:52PM
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CA Kate

I guess I'm not sure who exactly wants this??? Do your parents want you to do this because they invested money in your property and want to protect their investment?

If your parents were doing this to their home it might make more sense than for you to do it to your home. It seems that they are trying to protect their right to live in the quarters they paid for if you were to die first. I'm with the others, get a really good real estate attorney... and perhaps an elder attorney as well, since both sides need protecting.

    Bookmark   April 23, 2014 at 1:51PM
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That's a new one for me, never heard of that. It may be what my neighbors have, their home is not owned by them it belongs to something they set up. See an attorney, if you are not sure of what he says see another one. Attorneys do not know it all, but some think they do. I went to one when my husband was diagnosed with AZ. My question to him was what would happen to me financially if my husband had to go to a care home. The attorney said I would have my social security to live on and no home or car. Of course he was wrong, but I would have thought he would have known better than that.

    Bookmark   April 23, 2014 at 4:32PM
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Definitely talk to a lawyer, don't ask for legal and financial advice on public websites. Gardenweb forums are mostly friendly, social networks. Not a replacement for legal advice.

    Bookmark   April 24, 2014 at 9:47AM
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You are right it is not a replacement for legal advice, but the advice given here gives the original poster something to think about and questions to ask when seeing an attorney.

    Bookmark   April 24, 2014 at 12:21PM
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CA Kate

Emma: your neighbors' Trust may own their home. Our Trust owns ours. DH and I are the Trustees. I've heard of the poster's kind of encumbrance by another name. My stepfather had to go to court to get his own house removed from his son's grasp from the same sort of thing. It was an expensive mess.

    Bookmark   April 24, 2014 at 8:37PM
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I was told her kids couldn't get the money unless they applied for a loan and made arrangements to pay it back. The would have to have a good reason and good credit to get it. I wouldn't trust anything like that. I want control of my money and home. It is mine to do with as I choose. I did not even want it in a IRA. I am thinking maybe the people put in that kind of trust so a care home could not get it. I don't really think that would work for that.

    Bookmark   April 26, 2014 at 10:14PM
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CA Kate

Oh, that is one of those deals where you borrow back the equity in your house from the bank who then takes possession when you either die or can no longer live in your house. Since you get to live there 'forever' and they pay you $$ every month, the bank would like you to expire sooner than later.

My SIL has one of those. She really needs to go into a care facility, but no longer has any rights to any equity if she were to sell. Therefore, she has no extra money to pay for a nursing home... or anything else.

    Bookmark   April 27, 2014 at 12:17AM
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CA Kate

Ah, yes, a Reverse Mortgage.

    Bookmark   April 27, 2014 at 1:12PM
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I just meet a man(at estate sale) who's mom had a reverse mortgage & now that she is dead they are having a time of it, even before, interest is due when they die & they have had to get lawyers & somehow the caregiver was 2 weeks from turning the house over to herself. They said it is the biggest mess you can imagine. I didn't know that all the time you collect monthly payments you owe interest on it!! Thought it was your equity from your house. Very dangerous business & if 1 spouse is under certain age 60 I think & older 1 dies the other spouse can be forced out. That was on ABC news out here awhile ago. Last thing in world I'd do.

    Bookmark   April 29, 2014 at 1:42AM
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Reverse mortgages have their uses, but there are guidelines and regulations everyone should be aware of before going into one.

Again, this is generating a lot of misinformation by way of being half-knowledge. I realize people are trying to be helpful to the OP, but these posts are NOT going to help the OP. They merely cloud the issue and confuse the ability to investigate an issue properly.

The very best advice is to learn WHO to ask for advice on a specific subject. Otherwise, it's like asking an audiologist whether you should have surgery for a breast cyst or get a colonoscopy.

Professional knowledge is always specialized. For example, if people understood that CPAs learn very little about tax issues, they wouldn't assume that every CPA is an expert on them. The CPA course includes one single short class on tax issues over a two year study. To be a tax professional takes additional study and certification; it's a specialist's area.

    Bookmark   April 29, 2014 at 6:32PM
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A life estate is NOT a reverse mortgage. I agree with others that questions about legal matters, especially those involving ownership of property, should be addressed to a qualified professional.

The link below gives "some" information about a life estate. But it is not a substitute for talking with professionals and specialists.

Here is a link that might be useful: Life Estate

    Bookmark   April 29, 2014 at 10:49PM
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CA Kate

Thank you, Shambo, for this very detailed explanation of Life Estate. This is exactly what my step-father had with his son. He had to go to court to get it removed. After he died the son still tried to claim the house from my mother, but my mom had her lawyer talk to his lawyer, and that ended that. When she died and left the house to me the son still wanted the house! I had my mom's lawyer take care of that too.

    Bookmark   April 30, 2014 at 12:09AM
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Thank you for all of your responses... I was just looking to see if anyone had ever had an experience with this situation. It is usually the parents home involved, not the 'child's'.

    Bookmark   May 2, 2014 at 9:42PM
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>>I was just looking to see if anyone had ever had an experience with this situation.>>

It's understandable you would want to ask. But people need to realize that the experience of someone IN ANOTHER STATE will not necessarily be helpful to their specific situation.

Never, ever, depend on a public anonymous forum for legal advice. There is nothing to be afraid of in talking to an attorney. I believe every state runs a Legal Aid department that can help residents define what kind of specialist is needed for referral to a specific situation. Your tax dollars are paying for it, so make use of it!

    Bookmark   May 3, 2014 at 6:04PM
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CA Kate

Jkom51: are you a lawyer?

    Bookmark   May 4, 2014 at 2:49PM
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