Q–My husband left me a life estate on his large house. I’m discovering that upkeep and repairs, as required of a life tenant, are costly. I’m sure my husband did not intend me to suffer financial hardship by continuing to live in the house.
The executor of the estate suggested that I sell the house (value about $200,000) back to the estate and lease it from the estate, but my attorney tells me not to do that.
What do you advise?
A–As a life tenant, you may sell your right to occupy the home. In general terms, the value of a life estate depends on the life expectancy of the life tenant. Because of your life expectancy at age 69, the value of your estate is no more than 48 percent of the fair market value of the property.
As a life tenant, you may use the property but cannot appropriate or injure any part of what is regarded as a permanent part of the land. The life tenant must also make “reasonable repairs”–those that are necessary to preserve and protect the property from ravages of time and use, and to maintain its value.
The courts have held that the failure to properly maintain the real property constitutes “waste.” A person who holds a reversionary interest may bring action against a life tenant for committing waste. The life tenant may in turn be found liable for damages.
Consult your attorney for more detailed advice.
Q–I bought a house in New Hampshire in 1977 and lived in it for about a year. I was in the Army, and was sent to Germany until 1983. Six other assignments in the U.S. followed until I retired in 1995. Last year we bought a house in California.
I would now like to sell the New Hampshire home, which has been rented since 1978. I would like to sell it as my primary residence, based on Army orders sending me to various locations, and roll the gain into my California residence. Will this work?
A–I doubt that your plans will meet IRS requirements. One, you rented and depreciated your former residence for nearly 20 years. Two, if you owned and homesteaded any other home during this period, it would be considered your primary personal residence.
Your domicile and primary residence is primarily a matter of “intent” and actions. Some of the items considered indicative of your intent are: 1. Homestead status of property. 2. Your mailing address. 3. Time spent in each state. 4. State where driver’s license is registered. 5. Location of voter registration.
I suggest you present the facts to a tax accountant for review and advice.
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Have a question about real estate? You can write to George Karvel in care of the Chicago Tribune’s Your Place section, 435 N. Michigan Ave., Chicago, Ill. 60611. Answers will be provided only through the column.
