Does A Life Estate In A Property Have Anything To Do With The Other Assets?

421CFC1F-5C38-4C9C-9255-6EE2C765F6C0I was recently talking to a daughter whose mother had passed away. She told me that her step-father made a comment after the funeral that nothing would be probated or nothing would be changed until after she died.

I started to question the daughter, because I could tell that she had basically just taken his statement as fact and wasn't planning on doing anything at all as a result of the passing of her mother.

I learned pretty quickly that her mom and step-dad each had all of their own assets in their own names alone. The step-father did own a life estate in the property that mom and step-dad had lived in; at his passing, it would go to the daughter.

I explained to the daughter the difference between probate and non-probate assets. A probate asset is an asset that is in the individual's name alone, and upon their passing must go through the probate process according to the terms of their Last Will and Testament to the individuals who are named in the Will. A non-probate asset is an asset that transfers outside of probate, meaning that it transfers by operation of law to the individual, and not through a Will. 

In this particular circumstance, it was clear that the step-dad absolutely had a life estate in the property and was allowed to live in the property during his lifetime, so long as he was not living with another woman. 

However, I did not agree that all of the others assets would just stay where they are. Due to the fact that they were not jointly owned by mom and step-dad, but rather were in the mother's name alone, then they had to go through probate.

When I looked at the mother's will, 100% of her estate went to the daughter. Based on this information, I told the daughter, much to her surprise, that she did need to open an estate as the executrix of the estate, and that 100% of the assets would go to her and not to the step-dad. 

She wanted to know if she needed to give any of those assets to step-dad, and I said, not by law, as your mom provided 100% for you. It seemed obvious to me that mom wanted step-dad to have a place to live, but that otherwise he was able to take care of his own needs.

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When it comes to estate planning, we define “disability” or “special needs” in a very unique and client centered way.

Brothers-1633653_640 (2)A colleague recently asked me to do a blog on the definition of disability, and sent me an article that broke down the definition of disability under the Americans with Disabilities Act as well as medical terminology and other applicable definitions.

While trying to figure out how best to write this blog article as it relates to families who have children with special needs and whether or not they need special needs planning, I realized that the definition of disability is not necessarily what we should focus on. 

In estate planning, we often talk about a special needs trust as a way to provide assets to an individual with disabilities so that they can receive the money from the family, but also be entitled to any public benefits to which they may be entitled.  For sole reason, whether the person will need public benefits in the future is more important than the definition of disability.

Although many of the public benefits programs such as SSI or Medicaid or waiver programs for individuals with disabilities will often be predicated on the fact that the individual have a disability, those will be governed by the requirements for each individual program.  Many of them use the Social Security definition of disability, but each person will ultimately need to know which program they are applying for.

In the estate planning context, we always advise people that it is better to plan for the worst case scenario, and if the individual ends up not needing the planning that was done, there are always ways for a trustee to be able to distribute money out regardless, so it is much better to be safe than sorry. 

I hope this article gave some insight into how you cannot over-plan, but you can certainly under-plan.  In a circumstance where a family has a child or adult with a disability, and there is any potential that they will be receiving public benefits in the future, it is imperative that there be a proper plan in place so as not to take any chances.

In other words, secure your future as well as your family's future after you're gone. 

If you have questions about planning for your loved one with special needs, contact us here by filling our our simple form.  We hope to hear from you and help get your questions answered.