A “life estate” occurs when a person has a legal right to use property during life, but does not own the property outright. That person is called the “life tenant." After the death of the life tenant, the property passes to the named beneficiaries, called “remaindermen.”

You can create a life estate by will, trust, or deed.

See a lawyer for help if you would like to create a life estate or if you are involved with one as a life tenant or remainderman.

Why Make a Life Estate

Life estates are not commonly used, but they can be a useful tool in some situations. For example, some people may want create a life estate:

• To allow a surviving spouse to stay in a shared home. Eduardo wants to leave his house to his grown children, but he wants his wife (not their mother) to be able to live in it for the rest of her life. So he leaves her a life estate, with the “remainder” to his children.
• To provide a home for a special needs child. Martha has three adult children, one of whom has special needs and lives at home. Martha wants to make sure that if she dies, her child with special needs can continue to live in the house. But ultimately, she wants the house to pass to her other children. So she creates a life estate in the house for her child with special needs (in or alongside a special needs trusts that provides other protections and benefits for that child), and she names her other children as the remaindermen.
• To stay in your home after passing it to your children. In some cases, it can be beneficial—particularly when dealing with Medicare eligibility—to transfer your home in a life estate to yourself, and name your children or other remaindermen to get the property when you die. This essentially transfers the property to your beneficiaries before you die, while allowing you to live in the property for the rest of your life.

In any case, creating a life estate can have significant financial implications for the life tenant (including possible gift taxes, if you create a life estate for yourself). For this reason, get help from a good estate planning lawyer.

During the Life of the Life Tenant

A life tenant has responsibilities while using the property. Because he or she is not the true owner, he or she must maintain the property for the remaindermen. This can include general upkeep and necessary improvements. The life tenant may also be financially responsible for the home, including payment of the mortgage, utilities, real estate taxes, and homeowners insurance.

A life tenant does not have the right to sell the property outright, but he or she can sell her life interest in the property. In that case, the buyer would own (and be responsible for) the property for the rest of the life tenant’s life. A life tenant can also rent or lease the property.

During the life of the life tenant, the remaindermen don’t have a right to use or sell the home, nor do they have any responsibilities for its upkeep. But because they own a future interest in the property, their creditors can put a lien on the property and then act on the lien after the death of the life tenant.

As you might imagine, there can be tension between the life tenant and the remaindermen. As the ultimate owners, the remaindermen may put pressure on the life tenant to maintain the integrity and value of the property. And the life tenant may be less inclined or incapable of meeting those expectations. However, if the relationship between the life tenant and the remaindermen is good—for example, if they are a parent and child or siblings in good standing—then they can all work together to maintain the property for everybody. For example, the remaindermen may see the benefit of investing in improvements in the property during the life tenant’s use of it. Or they may all work together to sell the property, if needed.

When the Life Tenant Dies

When the life tenant dies, the property passes to the remaindermen. This can happen outside of probate if the life estate was created by deed or trust. Transfers by will need to go through probate.

The remaindermen will then be the outright owners of the property, they will have the power to use or sell the property, and their creditors may take action to reach the property.

An Estate Lawyer Can Help

While life estates can be useful in some situations, they aren’t always the best choice—and there may be better ways to accomplish your estate planning goals. Discuss your situation with a good estate planning lawyer to make a plan that’s right for you and your family.

Questions for My Lawyer

• Should I create a life estate for myself?
• If I leave my vacation house in a life estate to my wife, will my children have a right to visit?
• Can I force a life tenant to put on a new roof?