What is a life estate in property?
A few months ago I received a call from a woman who wanted to leave a certain piece of property to another person said, well, why don’t you come on in and show me the deed so I can understand what’s going on regarding the property. And I looked at the deed and it said that she had a life estate in the property, and that somebody else had the remainder interest. So it brings up a great discussion. What is a life estate? And can somebody with a life estate deed the property to someone else? The answer to the second part of the question is no.
So what a life estate? It is somebody who either somebody gave them a life estate and a property, and that means that they’re able to live in the property. For the remainder of their life or they deeded the property and conveyed the property to somebody else. And that person has their remainder interests, but he reserves to himself the ability to live in the property, and he has kept for himself a life estate. So usually when you look at the deed, most of the time it is a quick claim deed and it’ll say, aye, the grant or leave this property to so and so. And I retain a life estate in the property. What that means to the world is there are somebody else who already has the remainder interest in the property. So if you go ahead, or the person who retain the life estate passes away, that property does not go to their heirs.
That property goes to the remainder owner on the deed. Typically, this could also be used as an estate planning tool for an older person whose home is their only real asset. Sometimes we see this done when a child is living with an elderly parent and helping to take care of the parent. When the parent passes away, the property automatically transfers to the child without having to go through the probate process.
Before deciding to undertake this estate planning tool, it is probably a good idea to speak with a lawyer or tax accountant about the possible tax consequences. You need to know a life estate is out there so if someone brings it up, you know what they are talking about. A life estate can be an estate planning tool. It can be used to transfer property without having to go through probate. But you have to know that once you have transferred the property to the other person, the remaindermen, you cannot go ahead and undo that unless there’s some circumstance that you can actually show the court that you made a mistake and you want to reform the deed