If a couple in a second marriage live in a home owned only by one spouse, important questions arise when the spouse owning the home passes away. Where will the surviving spouse live? If he/she continues to live there, will the children of the spouse owning the home still be able to ultimately receive the home? The deceased spouse may have wanted to ensure the surviving spouse has a place to live, but have the home ultimately end up with his/her children.
If the home is left to the surviving spouse by a will, it becomes the property of that spouse. There is nothing that would prevent the surviving spouse from passing the home on to his/her own children. On the other hand, if the house is left to the children, there is no way to ensure that they will allow the surviving spouse to remain in the home.
There are at least a couple of ways the interests of both can be protected. One way is to utilize what is called a “life estate.” A person given a life estate in a home has the right to live in that home, but that right automatically extinguishes when the person passes away. A life estate can include certain obligations. For example, the life estate can provide that it extinguishes if the person moves out of the home, or fails to maintain it. It can even require that the person living there pay rent.
Whenever the life estate ends, either because the person passes away or fails to comply with the conditions, the property will transfer to whomever is given what is called the “remainder” interest. In this way, the surviving spouse can be given a life estate in the home, and the children can be given the remainder interest. Both can receive what the deceased’s spouse wanted them to have.
A similar result can also be accomplished through a trust. We will be talking more about this and other advantages of trusts in future columns.
© 2016 Steven J Wright