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Unintended Consequences: How Using a Life Estate Results in Gift Tax Liability

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Using a life estate to transfer a house or other real property has been a planning technique used by many seniors. Many people who use this tool do so because it is quick and easy. In reality, what they are doing may result in a variety of unintended consequences. One of those consequences is that the person creating a life estate may unknowingly exceed their annual gift tax exemption.