One of the biggest challenges about writing your trust or will is understanding all the terms and meanings involved. It can be a pretty intimidating process. Of course, that doesn’t mean you should delay drafting a trust for this reason. One of the things that people often get confused about is life interest.
What is it? What is it for? Today we’re going to discuss all of that to help you better understand.
Here’s what you need to know:
What Exactly is a Life Interest?
A life interest is a person’s right to enjoy the specified property for the rest of their life. The property cannot be disposed of or sold without their consent during their lifetime.
When is it Used?
A life interest is often used when a person transfers property to someone else, but they will still benefit from the income it generates or its use during their lifetime. An example of this is if you’re transferring your house to your child, but you’ll still be living in it for the rest of your life.
The Purpose of a Life Interest
A life interest can be created for several purposes, but the most common is to allow the grantor to use the property during the grantee’s lifetime. The grantor may use the income it generates or the property itself. If the grantor is still living when the grantee dies, the grantee’s interest ends, and the property reverts to the grantor.
Giving someone a life interest is a great way to receive a gift. It gives them the immediate enjoyment of the property, but it also leaves the property with the grantor in the case of their death. This can be appealing to people who would otherwise be unwilling to sell the property. Many people prefer to keep the property in the family in this way.
How to Create a Life Interest
A trust is an excellent way to create a life interest, but it’s not the only way. There are other ways, but it is essential to consult a lawyer.
The following is a sample of the life interest clause of a trust:
“I, Jake Gray, hereby give a life interest in the following property to my son, Billy Gray. He shall have the right to live in the house and use the income from it for life after my death. If he outlives me, the property shall revert to myself and my estate.”
This is only a sample. This must be done in a trust because it is a legal document.
How to Modify or Terminate a Life Interest
It’s possible to modify or terminate a life interest. However, this must be done within the power granted by the document. If not, it could be considered invalid.
If someone who has a life interest wants to sell the property, they have a right to do so. However, they must obtain the consent of the beneficiaries of the trust to do so. If a life interest is granted to a person and their spouse, the right to sell the property may be granted to both of them.
If a trust exists that contains a life interest, the trust would have to be amended or terminated if the parties decide to sell the property. A competent trustee can do this.
The Bottom Line
A life interest is a common way to transfer property to someone else. It allows them to enjoy the property for life, but it remains in the hands of the grantor. This is why it is an excellent way to leave the property in the family’s hands. Keep in mind that there are other legal means to transfer property to someone.
It’s essential to seek the advice of a lawyer to ensure that your trust or will meet your desires and the federal and state laws that apply.
If you are looking for an experienced and reliable estate lawyer, we can help you. Ontario Wills & Estate Plans is a law firm based in Ontario that serves Canada. Our services are available through video conferencing. Get quality legal advice from the best Ontario lawyers. Contact us today to learn more about our services!