Estate planning often involves a great deal of creativity. Virtually any type of planning that you could hope to do after you are gone can be accomplished through the imaginative use of various estate planning tools. Whether you want to leave your children certain items or you want to provide your heirs part of their inheritance now, an estate planning attorney can help. Hugh Hefner, the billionaire owner of Playboy, is an example of this creativity at work.
Hugh Hefner’s Creative Planning
Built in 1929, the Playboy Mansion includes 29 rooms, and is worth approximately $100 million. It is located in Holmby Hills, Los Angeles, California. It is near Beverly Hills, and has been the home to hundreds of lavish parties. It is a well-known property with an extensive reputation.
In January 2017, the Los Angeles Times reported that Hugh Hefner is currently living in the Mansion, but he no longer owns the property. In the summer of 2016, Daren Metropoulos, an investor, purchased the Playboy Mansion for $100 million. However, he bought the Mansion with a provision that Mr. Hefner would be permitted to live in the home for the remainder of his life. Currently, he is 90-years-old, and is leasing the Mansion for $1 million per year.
Life Estates in Southern California
The arrangement that Mr. Hefner has with Mr. Metropoulos is not completely uncommon in Southern California, where older wealthy residents reside in high-value homes. For example, socialite Zsa Zsa Gabor lived in her Bel-Air estate until age 99, despite the fact that she sold the residence for $11 million three years earlier.
In fact, experienced estate planning attorneys in Orange County understand that there is an entire subculture of those who sell assets that have appreciated a great deal over their lifetime. Instead of passing the property through their estate, they sell the property and arrange to have a life estate so that they can live out their remaining years in their home.
Gifting the residence with the same arrangement for life estate is also a viable option. The tax benefit for that type of gift can be significant, which a huge benefit for those with higher incomes.
Selling Property with a Life Estate in California
In some situations, older homeowners that may have cash flow problems may sell their homes to support their continued occupancy in the home and current lifestyle. This type of arrangement is similar to the French concept of “viager.” It means “for life” in French. The concept requires that the buyer make a down payment and then send regular sums to the homeowner. Essentially, the plan is a gamble that the owner will pass away before the entire value of the home has been paid.
In the United States, the deal usually involves paying the full value of the property up front, which means that it is not dependent on when the seller passes away. The buyer will usually want a discount on the property because of the life estate associated with the sale. Nonetheless, these arrangements are still rare, even in Southern California.
The creative part of estate planning allows you to adjust the deal so that it meets both parties’ needs. A variety of factors such as the seller’s age and the property’s unique reputation should be considered in creating the deal. An experienced estate planning attorney can help with this process.