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Understanding the intricacies of life estates is crucial, especially when it comes to selling property. Let's explore the dynamics of life estates and clarify who is entitled to receive the proceeds from the sale.
Unpacking Life Estates: Ownership Dynamics
In a life estate scenario, there are essentially two parties involved:
1. Life Tenant
The life tenant, typically the individual who received the life estate interest, holds a present possessory interest in the property. This grants them the right to reside on the property for their lifetime.
2. Remainderman
The remainderman, one or more individuals, possesses a present ownership interest in the property. However, they cannot occupy or claim the property until the life tenant dies.
Selling Property in a Life Estate
When both the life tenant and the remainderman decide to sell the property during the life tenant's lifetime, certain considerations come into play:
Mutual Agreement: Neither the life tenant nor the remainderman can decide to sell the property unilaterally. Both parties must agree to the sale.
Proceeds Distribution: Upon the sale of the property, the life tenant and the remainderman are entitled to a portion of the proceeds. However, the distribution of proceeds depends on each party's interest type.
Life Tenant's Share: The life tenant's share of the proceeds is determined based on their life expectancy. Generally, younger life tenants receive a larger portion, which decreases as they age.
Remainderman's Share: The remainderman's share of the proceeds is contingent upon the life tenant's share. They do not receive any step-up in basis, potentially subjecting them to capital gains tax.
Your Trusted Partner in Estate Planning
atCause Law Office is highly experienced in Florida estate planning, offering guidance on complex matters such as life estates, asset protection, and elder law. Our friendly attorneys are dedicated to helping clients navigate the nuances of estate planning with confidence and clarity.
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Don't let questions and unknowns cloud your understanding of life estates and estate planning! For personalized advice and expert guidance tailored to your needs, contact atCause Law Office at 727-477-2255. Let us empower you to make informed decisions and secure a prosperous future for yourself and your loved ones.
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