Life Estate

My mother-in-law is currently in the hospital and we (the family) are trying to do some planning in case things take a turn for the worse. We are investigating Power-of-Attorney both for financial matters and healthcare, but have one item that we are not sure of how to approach. My father-in-law passed away 5 years ago, and their daughter lives in the house with the mother now. The deed to the house is in the mothers name. Is there a way to get the house transferred into the daughters name without any financial complications to either the daughter or monther? I have read some information on Life Estates where the property can be transferred to the daughter under the stipulation that the mother (whom is currently the titled owner of the property) can remain there for life. Can I please get information on the best (and cheapest) way to transfer the property?

Whoa! Lots of questions. First, consult with an elder law specialist to see what can be done about safeguarding assets from nursing home, medical and other costs. Have an insurance consultant review all coverage. Get a handle on the medical prognosis and how much time she might have. This will affect the planning considerably. Your mother in law should have a comprehensive durable (remains valid even if disabled) power of attorney prepared and signed authorizing trusted people to manage her financial affairs if in the future she cannot. A living will and separate health care proxy are advisable. Depending on the size of her estate and the types of assets, etc. a revocable living trust might warrant consideration. As for the life estate, you need an overall plan first and foremost, not one single technique. Is not fully clear from the question, but many people give their home to their children and in the deed retain the right to live in the home for the rest of their lives (called a life estate). The idea is that the home is a completed gift and may be put outside the reach of medical costs (but the rules differ but state, waiting periods may be a key issue, etc.). But since your mother in law has the life estate the house would be included in the value of her estate at death. Thus, the income tax basis (cost) of the house would be increased (stepped up) at death and if the family thereafter sells the house, any capital gains might be avoided. However, there are scores of ancillary issues that must be considered before jumping into this or any other plan. How many heirs are there? Do they get along? What is the size of her estate? Will she be subject to state or federal estate tax? What is the impact on the heirs? If your spouse (your mother in law's kid!) is a doctor worried about malpractice (or your divorcing her) perhaps the life estate is not the right approach and a gift to an irrevocable trust for your spouse's benefit, with creditor protection planning, is more appropriate. Lots of questions, seek a lawyer. If you want some reading on life estates you can see The Complete Book of Trusts (3rd ed.) John Wiley & Sons, Inc.