Q: Our son is going to buy my mother’s house while she continues to live there, with direct ownership of the house transferring to our son after my mother dies. What are some of the considerations we should be thinking about in this kind of arrangement?
A: The arrangement you are describing is called a “life estate” deed.
In drawing up a life estate for someone, make sure the legal document that creates the life estate specifies what financial and other obligations each party has. For example, real estate taxes. Make sure the legal document creating the life estate spells out who is required to pay the real estate, water and sewer and other taxes on the property. Ditto for routine repairs and maintenance of the property. Who will pay, supervise the work, and otherwise oversee repairs and maintenance. This includes such things as lawn upkeep, snow removal, trash removal, etc., as well as routine and more major repairs and upkeep of the house. Often, these are considered to be the responsibilities of the life tenant, as is, of course, any mortgage payments on the home. But they do not have to be. Just make sure the legal documents spell out who is responsible for what. Do not forget about homeowner’s insurance. Often, this is considered to be the responsibility of the “remainderment” – the person who gets the property at the end of the life estate. Again, make sure the legal documents specifies who is responsible for paying the homeowner’s insurance.
You should also include language in the life estate documents detailing circumstances under which the life tenancy will end. For example, if the life tenant moves out of the property for any reason, the life tenancy will end. This will give the remainderment the opportunity to rent out the property or move into it as his own personal residence.
I also recommend that you consult an attorney to draw up the life estate. You are creating a legal document, and should get legal advice.
Linda Goodspeed is a longtime real estate writer and author of "In and Out of Darkness." Email her at email@example.com.