Property ownership is the right to possess, enjoy and dispose of property. There are different types of ownership. One's right or interest in property may vary from complete ownership to a temporary right of occupancy. The nature of one's interest in property may determine what becomes of that property upon the person's death.
A life estate can help to avoid probate and ensure that the intended heir gets the property. It also has certain tax benefits, such as reducing estate tax and other taxes.
A life estate gives you the right to live in, use and enjoy property during your lifetime. The person granted the life estate is called a life tenant. The person granting the life estate and the actual owner is called the grantor. For the tenant, the ownership in this type of property is temporary and ends upon death. Therefore, the property can't be left to the life tenant's heirs. Where does the property go? It goes back to the grantor or someone else that the grantor designates
Creating a Life Estate
A life estate can be created by a deed or will. Within either document, the grantor shows the intention of passing to another person the right to posses, use or enjoy a certain piece of property during the tenant's life. Special words in a will aren't required to create a life estate. The probate court looks at the intention expressed in the will and bases its opinion on that intent.
Rights of Life Tenant
A life tenant only has a right to the property until death. During that time, a life tenant can allow someone else to live in, use and enjoy the property while he's alive. However, the life tenant can't grant an interest greater than his own and can't give indefinite ownership to another person. Furthermore, neither the life tenant nor any person that she or he has transferred interest in the property to, may damage or devalue the property.
Life Estate with Remainder Interest
Remainder interests are future interests in property. For example, Victor decides to give Bob a life estate, and Carolyn a remainder interest in his property. What will happen? Bob will get to use the property for life and when he dies Carolyn gets ownership of the property.
Sometimes the remainder interest only passes to others if they outlive the life tenant. If you have a remainder interest or even a life estate, you should check whether the grantor has given special instructions in case the person with the remainder interest dies first. You can also check the laws of your state laws to find out about this particular circumstance.
Order from Court to Sell Property
A life tenant doesn't actually own the property where he or she lives so it can't be sold. A court would have to give the life tenant the ability to sell the property and to receive an amount equal to the value of the estate so he or she can live somewhere else.
Life Estate for Self or Another
You may give yourself a life estate interest in your property so that you may use your property during your life and then have it pass to another upon your death without having to go through the probate process. Alternatively, you can give a life estate to another person. The advantage in doing this is that you'll avoid paying real estate taxes, maintenance and insurance costs because the life tenant will pay all these things
Uses of Life Estates
Life estates are often used when an elderly parent wants to transfer their home or property to a child before their death, but wants to continue to occupy it until they move to an assisted living care facility or pass away.
Another example of when a life estate would be created is when a person wants to ensure the property stays in the family. In this case, a person may give their surviving spouse a life estate until he or she either dies or remarries.
Questions for Your Attorney
- If you give someone a life estate, do they have the right to move out and rent it to someone else for income?
- What rights in the property does the owner of the property have after they give a life estate to someone?
- Are there any tax benefits to creating a life estate?