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Who owns the property in a life estate?
In this article, you’ll learn about:
Let’s dig in.
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In a life estate, the property ownership is split between two parties:
The life tenant has the right to live in or use the property for their lifetime.
They are responsible for:
However, they do not own the property in its entirety.
The remainderman is the party who will take full ownership of the property after the life tenant’s death.
While they have future ownership rights, they can’t use or occupy the property without the life tenant’s consent during the life tenant’s lifetime.
Therefore, the life tenant and the remainderman both have specific forms of ownership, but their rights and responsibilities vary.
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A life estate is a type of property agreement.
It involves two roles: a life tenant and a remainderman.
A life tenant is someone who has the right to live in or use the property during their lifetime.
They must maintain the property, pay any taxes or insurance, and can’t cause damage that reduces the property’s value.
The remainderman is the person who will gain full ownership of the property after the life tenant’s death.
Until then, the remainderman can’t live in or use the property without the life tenant’s agreement.
Therefore, a life estate splits property rights between two parties.
The life tenant has the current use, and the remainderman has the future ownership.
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A life estate can present several problems:
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Removing someone from a life estate can be complex, depending on who you want to remove.
If you’re looking to remove a life tenant, it can only occur under specific circumstances.
For instance, if the life tenant voluntarily decides to give up their rights or if they violate the terms of the life estate, like failing to maintain the property.
However, the life tenant cannot be forced to leave unless they break the agreement.
To remove a remainderman, the life tenant can’t do it alone.
It requires the remainderman’s agreement.
Both parties can work together to modify the original agreement, or the remainderman can voluntarily give up their future interest in the property.
In both cases, the changes should be made official through proper legal documents to avoid future disputes.
There are steps to removing someone from a life estate.
These depend on whether the person to be removed is the life tenant or the remainderman.
Here is how to remove the life tenant from the life estate:
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Yes, a remainderman can be removed from a life estate.
Here is how to remove a remainderman from a life estate:
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In a life estate, a remainderman has the right to inherit the property when the life tenant dies.
This right to future ownership is certain, but it can’t be exercised until the life tenant’s death.
During the life tenant’s lifetime, the remainderman has limited rights.
They cannot use, live in, or control the property without the life tenant’s consent.
The remainderman can, however, ensure that the life tenant doesn’t damage or degrade the property in ways that would significantly decrease its value.
If such damage is attempted, the remainderman can take legal action to prevent it.
The remainderman also has the right to sell their future interest in the property.
But the buyer must wait for the life tenant’s death to claim possession.
After the life tenant’s death, the remainderman becomes the full owner of the property, gaining all rights associated with ownership.
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Yes, a life estate can be contested, generally by the remainderman or other interested parties.
Grounds for contesting a life estate can include claims that the life tenant:
The life estate could also be contested if:
In such cases, the disputing party would need to file a lawsuit and provide evidence to support their claim.
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A life tenant can sell their life estate interest in the property.
But what they’re selling is their right to use and occupy the property for their lifetime, not the property in its entirety.
This means the buyer would only have the right to use and occupy the property for the duration of the original life tenant’s life.
However, the life tenant can’t sell the property outright without the remainderman’s consent.
This is because the remainderman holds a future interest in the property.
If both the life tenant and the remainderman agree to sell, they can sell the property together.
The proceeds would typically be divided based on the life tenant’s age and the property’s value.
In a life estate, the life tenant can sell their life interest in the property before they die.
But they can only sell what they own, which is the right to use and occupy the property for their lifetime.
This means the buyer would acquire the right to use and occupy the property, but only for the duration of the original life tenant’s life.
It’s also important to note that the remainderman’s rights are not affected by this sale.
The remainderman still becomes the full owner of the property upon the death of the original life tenant.
This is regardless of who is using or occupying the property at the time.
On the other hand, the remainderman can also sell their future interest in the property.
However, the buyer would still need to wait until the death of the life tenant to take full possession of the property.
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Here are other questions that our clients have related to who owns the property in a life estate.
Yes, a life estate does override a will.
When a life estate is created, the remainderman is automatically entitled to the property upon the death of the life tenant.
This transfer of property happens outside of probate, the process where a will is executed.
So, even if a will states differently, the property still passes directly to the remainderman.
It’s important to coordinate a life estate with other estate planning tools to ensure the property is distributed as intended.
Read More: How Long Do You Have To Transfer Property After Death?
Yes, a lien can be placed on a life estate.
If the life tenant has unpaid debts, a creditor may place a lien on the life estate property to secure payment.
This lien affects only the life tenant’s interest in the property and is extinguished when the life tenant dies.
It does not affect the interest of the remainderman.
However, while the lien is in place, it may complicate matters:
The lien would typically need to be satisfied from the proceeds of any such sale.
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In a life estate, the life tenant is responsible for paying the property taxes.
This is part of their obligation to maintain the property and cover its expenses while they have the right to live in or use it.
The remainderman, who will inherit the property after the life tenant’s death, is generally not responsible for property taxes during the life tenant’s lifetime.
However, once the life tenant passes away, and the remainderman becomes the full owner, they will then be responsible for property taxes.
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When the life tenant dies, and the property passes to the remainderman, it typically does not trigger capital gains tax.
This is because the property receives a “step-up” in basis to its fair market value at the time of the life tenant’s death.
Let’s say the remainderman then decides to sell the property.
They would owe capital gains tax only on any increase in the property’s value from the time they inherited it until the sale.
If the property’s value decreases or remains the same, the remainderman might not owe any capital gains tax upon sale.
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