|Question 7: What is a life tenancy? Someone told my client that he should establish a life tenancy on an inheritance that has been directed to him after the death of the first beneficiary. |
Answer: When it comes to estate planning, understanding what the various legal concepts and devices mean, and what each does is the easy part; but figuring out how to work them together into an asset-preserving, tax-saving strategy is much more demanding and, potentially, complex.
Now, with that being said, I referred your inquiry about a "life tenancy" to attorney David V. Schultz, who offers this definition and advice:
A life tenancy is a form of ownership whereby X may use and enjoy the property during his lifetime, but upon his death, the full ownership of that property rests in Y. It normally only refers to an interest in real estate, an asset that does not get consumed (like cash, for instance); because the life tenant has a legal duty to not "waste" the asset--meaning, not to do anything that will diminish the value of what is due to pass, eventually, to "the remainderman" (Y).
As to whether the establishment of a life tenancy in your particular situation is advisable, a host of other background facts would have to be known; and even then, I strongly recommend consulting with an estate planning attorney. Transactions of this type always have tax ramifications--both gift and estate taxes--which can only be factored in when the entire fact situation is known.