Being granted permission to live on a certain property until your dealth is called a life estate. When you die it goes back to the persons or probate that granted you the priviledge in the first place. You do not get to will it to your kids.
The basis of a life estate is the fair market value of the property or assets at the time that the owner died. This is a stepped up amount (usually) from their cost basis at which they purchased it.
Life estate is taxed based upon the original value when it is created, not the accellerated value throughout and over time once it is created. You must work closely with an attorney on these.
The basis (cost) of a life estate, is what the original owner paid for the items in the life estate. While this form of estate planning can preserve assets, it also creates larger gains to the recipient when sold.
Best way i can decribe a Life estate is that I bought my aunt house who at the time was 70 years old for 10,000 dollors. But we gave her a life estate witch gave her the right to live there as long as she lived and we could not kick her out.
The basis of life estate is when someone designates ownership of property for the remainder of that persons life. So if you have a relative who gives you a piece of land that they own, and that relative has a life estate on it, then that means they can still enjoy the land until they die.
