One common question that can come up in estate planning is: Does a life estate override a will? A will is a legal document outlining how someone’s property is to be distributed after their death. A life estate gives the owner of a property the right to live in or otherwise use the property while alive, after which ownership passes to someone else. Usually, a life estate overrides a will. That is, if a life estate says one person will get full ownership of a property after the owner’s death, and the will dictates something else, the life estate generally prevails. Discussing your estate plan with a financial advisor can help you decide when and how to use a will or life estate.
Introduction to Wills and Life Estates
A will is an estate planning document that describes how someone’s property will be distributed after their death. It generally appoints an executor, who is responsible for carrying out the deceased’s wishes, and names the people or organizations who are beneficiaries. A will can be a simple hand-written document, and can easily be updated to reflect changed circumstances. The terms of a will don’t go into effect until after the person’s death.
A life estate is used to pass property on to someone else after death, while still retaining the right to use that property while alive. A common example is a parent who wants to live in the family home while ultimately handing ownership of the home to their child.
A life estate sets up joint ownership of an asset, with each party having specific rights and responsibilities. The person who retains the right to live in the home is called the life tenant. The life tenant is required to maintain the home and pay any taxes or insurance. The life tenant may also be able to rent the home and keep the income.
The person who will receive full ownership of the home after the life tenant’s death is called the remainderman. The remainderman has no right to use or even enter the home while the life tenant is alive. The life tenant can’t sell the home without the remainderman’s permission, although the remainderman can sell their interest if they choose.
Life estates help planners avoid probate, which can save time and money when settling an estate. They may also be able to protect against Medicaid estate recovery, as long as the life estate is dated at least five years prior to tapping Medicaid benefits.
Life estates are also inexpensive compared to other ways of transferring property in estate plans, such as trusts. However, once partial ownership of a property has been transferred with a life estate, it’s hard to change. Ordinarily, the remainderman must consent to any changes, including removing or naming a different remainderman.
Does a Life Estate Override a Will?
In general, a life estate takes precedence over a will. For example, if a will states that a property will be transferred to a person upon the original owner’s death when a life estate has already been created splitting ownership of that property with someone else, the terms of the life estate will prevail.
There are some exceptions to the potency of a life estate. For instance, if the language in the will specifically addresses the terms of the life estate, it may overrule the life estate. Sometimes, life estates may be created in the will itself. In this case, a life estate created in a prior will may be invalidated by a life estate written into a will at a later date.
Different rules may also apply in different legal jurisdictions that can limit a life estate’s ability to distribute property. In states with homestead rights, for example, a life estate may not be able to specify that the original owner is waiving their homestead rights.
Bottom Line
Life estates typically prevail over wills when settling an estate. Life estates set up a joint ownership of an asset such as a home and typically grant the asset’s owner the limited right to live in or otherwise use the asset while transferring ownership to someone else upon the owner’s death. Terms of a will, however, take effect only after the death of the person who has written the will. Wills may override life estates if a will specifically addresses the life estate, but otherwise the resolution of any conflicts between a will and a life estate favor the life estate.
Estate Planning Tips
- You can determine whether to include a life estate as part of your estate plan by discussing it with a financial advisor. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three financial advisors in your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
- Property taxes collected by local governments can be significant concerns for property owners in many areas of the country. Use SmartAsset’s Property Tax Calculator to estimate the average cost of property taxes in any given state and county.
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