Hazards of Basing an Estate Plan on Successive Life Estates

Abstract

<p>Recent reviews of two fact situations, hundreds of miles apart and both the products of planning a half century or more ago, illustrate the hazards of using a deceptively simple estate plan – basing the plan on successive life estates.<strong>1 </strong>The strategy often involves unexpected federal estate tax consequences,<strong>2 </strong>federal gift tax problems,<strong>3</strong> income tax basis complications<strong>4 </strong>and assorted problems relating to like-kind exchanges, involuntary conversions and easements, to mention just a few of the more likely events occurring during the term of the life estates. Although often viewed as more complex (and costly to set up), a carefully drafted trust generally provides a more satisfactory platform for intergenerational transfers than successive life estates.</p>