Overview of Life Estates

Establishing a Life Estate is a relatively simple process in which you transfer your property to your children, while retaining your right to use and live in the property. Life Estates are used to avoid probate, maximize tax benefits and protect the real property from potential long-term care expenses you may incur in your later years. Transferring property into a Life Estate avoids some of the disadvantages of making an outright gift of property to your heirs. However, it is not right for everyone and comes with its own set of advantages and disadvantages.

Life Estates establish two different categories of property owners: the Life Tenant Owner and the Remainder Owner. The Life Tenant Owner maintains the absolute and exclusive right to use the property during his or her lifetime. This can be a sole owner or joint Life Tenants. Life Tenant(s) maintain responsibility for property taxes, insurance and maintenance. Life Tenant(s) are also entitled to rent out the property and to receive all income generated by the property.

Remainder Owner(s) automatically take legal ownership of the property immediately upon the death of the last Life Tenant. Remainder Owners have no right to use the property or collect income generated by the property, and are not responsible for taxes, insurance or maintenance, as long as the Life Tenant is still alive.

Advantages

  • Life Estates are simple and inexpensive to establish; merely requiring that a new Deed be recorded.
  • Life Estates avoid probate; the property automatically transfers to your heirs upon the death of the last surviving Life Tenant.
  • Transferring title following your death is a simple, quick process.
  • Life Tenant’s right to use and occupy property is protected; a Remainder Owner’s problems (financial or otherwise) do not affect the Life Tenant’s absolute right to the property during your lifetime.
  • Favorable tax treatment upon the death of a Life Tenant; when property is titled this way, your heirs enjoy a stepped-up tax basis, as of the date of death, for capital gains purposes.
  • Property owned via a Life Estate is typically protected from Medicaid claims once 60 months have elapsed after the date of transfer into the Life Estate. After that five-year period, the property is protected against Medicaid liens to pay for end-of-life care.

Disadvantages

  • Medicaid; that 60-month waiting period referenced above also means that the Life Tenants are subject to a 60-month disqualification period for Medicaid purposes. This period begins on the date the property is transferred into the Life Estate.
  • Potential income tax consequences if the property is sold while the Life Tenant is still alive; Life Tenants do not receive the full income tax exemption normally available when a personal residence is sold. Remainder Owners receive no such exemption, so any capital gains tax would likely be due from the Remainder Owner’s proportionate share of proceeds from the sale.
  • In order to sell the property, all owners must agree and sign the Deed, including Life Tenants and Remainder Owners; Life Tenant’s lose the right of sole control over the property.
  • Transfer into a Life Estate is irrevocable; however if all Life Tenants and Remainder Owners agree, a change can be made but may be subject to negative tax or Medicaid consequences.

 

 

5 Tire Safety Hazards

Proper maintenance of your vehicle is an important step toward ensuring your safety on the road. Tire failures at high speeds can result in vehicle rollovers, serious injuries and death. Below are five safety hazards to watch out for; the presence of any of these conditions can indicate that your tires should be repaired or replaced – before it is too late.

Tires Not Inflated to the Proper Air Pressure: Incorrect tire pressure compromises both the comfort and safety of your ride. Improper pressure affects braking, cornering, stability, mileage and tire life. Furthermore, tires that are not inflated to the proper pressure face a higher risk of catastrophic failure resulting in a serious accident. Low tire pressure causes increased friction and can overheat the tire, causing tread separation. The recommended tire pressure is always less than the maximum allowable pressure stated on the tire itself. Your vehicle’s recommended tire pressure can be found in the owner’s manual, or the label on the car’s driver’s side door, glove compartment or gas tank door.

Worn Tread: If the tread on your tires has worn down, you are at an increased risk of a blowout or hydroplaning accident.  Additionally, worn tread may indicate a more serious problem, such as improper balance, suspension or alignment. Finally, tires with worn tread are more likely to be underinflated, affecting steering, braking and mileage, and causing further safety risks due to improper air pressure.

Tire Repeatedly Loses Air Pressure: If you often notice that one of your tires seems low, despite the fact that you have inflated the tires to the proper pressure, this could indicate a leak. There may be a small puncture in the tire’s tread, perhaps caused by driving over a nail, or it may be caused by a poor seal between the tire and rim or a damaged valve. These problems can often be repaired, rather than having to replace the tire. Ignoring the problem can lead to a sudden drop in tire pressure while on the road, which can result in a blowout or loss of control.

Bulge in the Sidewall: Any budge, regardless of size, indicates that the tire’s integrity has been compromised and the tire should be replaced immediately. This could be due to an impact with a curb or pothole. When such a bulge occurs, the steel belts inside the tire have weakened and can no longer ensure safe operation of the vehicle. Care should also be taken to ensure that the impact that caused the tire bulge did not also cause damage to the wheel itself.

Old Tires/Vehicles in Storage: If your tires are old or the vehicle has been immobile for a lengthy period of time, the tires may be affected by a form of “dry rot.” Regardless of how climate-controlled the storage environment is, tires that sit for extended periods will weaken over time until they are unsafe for travel. Similarly, old tires will show signs of degradation. You can identify this problem by examining the tire for small cracks in the tire’s sidewall. If any cracks are present, the tire should be replaced.

 

 

Need a good laugh?

A doctor and a lawyer met at a party. Their conversation was interrupted repeatedly by guests asking the doctor for medical advice. Finally, the exasperated doctor turned to the lawyer and said, "Tell me, what do you do to stop people from asking you for legal advice when you're out of the office?"

"When they ask, I give them advice", replied the lawyer, "and then I send them a bill in the morning."

The doctor decided to take the lawyer's advice and for the rest of the evening wrote down the names and addresses of everyone who approached him for advice. The next morning he took out the list, just as his secretary walked into his office and handed him a bill from the lawyer.