Imagine that you want to provide money and income to a specific beneficiary in your estate plan; however, you want to ensure that additional assets will be available to someone else after the first beneficiary dies. For example, maybe you want your spouse to benefit from your estate, but you want the core of your estate to be inherited by a child after your spouse passes away.
In a situation like this, you might benefit from a "life estate." Such an estate will last the lifetime of a specific beneficiary. It will also be restrictive, preventing the beneficiary of your estate from liquidating any income-producing assets prior to his or her death. The life estate, however, will dissolve following the death of the beneficiary, and a different beneficiary -- selected by you -- will then receive the remaining assets.
Life estates might be organized by people who want to donate money to another person's care, but are concerned that the beneficiary might not be able to manage the assets left to him or her. As such, the life estate will be invested into different investments that produce income in order to generate profit to pay a regular income to the beneficiary of the estate. Those investments might include, CDs, bonds, stocks, REITs, mutual funds annuities and so forth.
If your family could benefit from the creation of a life estate, you may want to discuss the possibility with your Illinois estate planning lawyer. Your attorney can examine your family's financial situation and needs to help you determine if a life estate is appropriate.
Source: Investopedia, "Life Estate," accessed Sep. 22, 2017