Let me first explain how a life estate works and can you the sale of life estate property before death?. A life estate is when you take the deed to your house you transfer it to your kids.
But in the deed itself, you reserve the legal right to live there for the rest of your life. You are in 100% control of that house while you’re alive nobody can kick you out it’s your principal residence.
Under New York law you keep all of your property tax exemptions, you keep your star, your enhanced, your veterans, your senior exemption you keep all your property tax exemptions.
Upon death, your life estate is extinguished automatically your kids on the house without probate and if you did this five years before needing McCade your house will be protected from Medicaid.
That sounds good well what’s wrong with that?
You got to love a life to stay for that it’s a relatively simple thing to do and by the way when you die owning your house and your children inherit the house or from a life estate that capital gains I talked about before getting wiped out if you die owning your house you wipe out the capital gains.
If you died own in your house or you give it away and reserve the right to live there. Your children will inherit the house and a new basis equal to the value at the date of death.
Can We Sale of Life Estate Property Before Death
If the house is worth five hundred thousand at the time of your death. Your children will get a basis of five hundred thousand dollars. They’ll sell the next day for five hundred thousand dollars what’s the capital gain 0 you get a step up in tax basis.
Sale of life estate property who gets the money?
It’s time to sell the house if the house gets sold When you have a life estate who gets the money?
Do the kids get the money?
Does the government get the money?
Do you get the money?
It actually could be a combination of all those things. You’re right to live in the house has a value and it depends on how old you are. If you’re a hundred what do you think the value is of your right to live there not too much.
If you’re two what do you think the value is of the right to live there pretty big. Actually what’s surprising is that the crossover age is 76. If you’re 76 years old your life estate is worth 50% of the property.
So at 70, you create the life estate at 75 you protect your property at 76 you decide to sell the house for 500,000 you get two hundred and fifty thousand and the kids to get two hundred and fifty thousand.
The half that the kids get they have to pay capital gains on it why it’s not their principal residence and they have control over that money. The half that you would get you’re going to get back but I don’t want you getting the money back.
Because now you got to get rid of it again. You just spent five to six years trying to protect your assets and now you’re unprotected half of them that’s crazy.
If the reason you’re trying to sell the house or the kids are trying to sell the house is because you’re not living there anymore because you’re in a nursing home you’re going to get two hundred and fifty thousand you can have to hand it over to Medicaid.