Life Estate

What is a life estate?

Life estate is a form of joint ownership of a property that allows a person to own and use the property as they see fit during their lifetime. This person is known as the life tenant and acts as the primary owner while they’re alive. This means all maintenance, upkeep, and upgrades are their responsibility. These individuals with a life interest in the property are also responsible for paying property taxes annually. 

After the life tenant’s death, the other property owner, known as the remainderman, becomes the sole owner. This can be a person, a trust, or another legal entity. At the life tenant’s death, the remainderman inherits the deed or remainder interest in the property immediately. 

There’s no need to go through the probate process, and as long as the remainderman files the life tenant’s death certificate, they’ll receive the property without delay.

Life estate FAQs

What’s the difference between a life estate and a living trust?

Life estates allow people to transfer ownership of a property to a dedicated joint owner without going through the probate process. It’s typically used for real estate and is designed to streamline the inheritance of the property. 

Living trusts can hold a wider variety of assets, including the following:

• Real estate
• Collectibles
• Stocks, bonds, and other investments
• Personal property
• Other forms of real property

Items held in a living trust are protected from litigation and can be inherited by different beneficiaries named by the person establishing the trust. Living trusts are managed by trustees who oversee the distribution of assets once the person who establishes the trust dies.

Can a will override a life estate?

In most instances, life estates will take precedence over a will. This is because the remainderman is named on the property’s deed and title, establishing a clear chain of ownership. However, beneficiaries of a person’s estate may be able to challenge the validity of a life estate with help from an estate planning attorney if they believe the agreement is invalid.

What are the advantages of a life estate?

The main advantage of life estates is the ability to avoid probate. Since the life estate specifies a joint owner who inherits ownership of the property, and that joint owner is named on the deed or title of the property, the line of inheritance is clear, and probate isn’t needed. This can save people money and reduce delays in their ability to take possession of the property.

What are the disadvantages of creating a life estate?

Since both the life tenant and the remainderman have ownership interest in the property, it can be harder for the life tenant to sell the property or name a new beneficiary to the property without the current remainderman’s permission. This could strain family relationships if children or other interested parties expect to inherit the property. 

Life estates also prevent the life tenant from refinancing their mortgage loan or taking out a second mortgage on the property without written permission from the remainderman. 

Furthermore, if the remainderman experiences financial hardship, creditors may place liens on their interest in the property.