What is a Life Estate?

Many clients approach us to discuss the possibility of using a life estate in their estate planning.  This post is designed to give an basic overview of the life estate. As always, please come in for a consult or schedule an appointment with your family attorney prior to changing your deeds or estate plan.

The life estate scheme divides ownership of a piece of real property between at least two parties—the Life Tenant and the Remainderman.  The Life Tenant holds ownership and enjoys the use of the property for the duration of his or her life.  The Life Tenant is responsible for the taxes, insurance, upkeep, and other expenses related to the property during his lifetime and has a duty to reasonably maintain the property while it is in his care. At the death of the Life Tenant, ownership of the property passes directly to the Remainderman (there may be one or multiple remainderman), who then owns the property outright.

A life estate can be useful in estate planning, as it is one way to keep real property from passing through the probate process.  A life estate can also be used in Medicaid planning, but this is often a risky proposition.  A life estate interest is often not included when figuring Medicaid assets, but it’s important to remember that there is a five-year look back period on transfers of this type that can often trigger a penalty.  There can also be tax implications associated with creating a life estate.

Other problems can arise in the context of a life tenancy.  In a life estate, the Life Tenant and the Remainderman are technically co-owners, so no one person has complete control over the property.  A conflict often starts when the Life Tenant fails to pay taxes on time or does not care for the property to the standards of the Remainderman.  Selling the property can also become complicated, as each interest holder may only sell what he owns.  In other words, the Life Tenant is only able to sell a life tenancy, and a Remainderman is only able to sell what will be his upon the death of the Life Tenant.  All interest holders would be required to agree to and sign off on a sale of the property in order to transfer full ownership.

Creating a life estate can be easy, but dealing with one can be difficult.  You should always consult an attorney to understand all of the pros and cons before executing a deed that creates a life estate.

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77 Responses to What is a Life Estate?

  1. Pamela says:

    We are on the deed of a home with the life estate. This was all done through an attorney with all parties present. Now they are suing to have us removed stating it was fraud and they did not understand. In your opinion do they have a good case?

  2. Pamela –

    Thank you for your post. I would need many more facts and a copy of the pleadings in the suit to be able to offer that type of advice. Many attorneys offer legal consults at a reduced rate which gives you an hour of their time to allow them to review the case and make a recommendation. I would strongly suggest you get a consult as soon as possible. If they have served you with a summons and complaint, you have limited time to answer so please don’t delay. Fraud allegations should be taken seriously and must be defended.

  3. Laura says:

    My husband and I are getting a divorce. We each will have property that will be in each others name. I want to make sure our daughters are left these properties.
    If one of us gets married would a life estate protect our daughters in keeping these property? Same question if we have a boyfriend or girlfriend living with us on these properties?
    If I did remarry and I had a step child or any other adult living in my house…..I died and my spouse died, will my children which will be named on the life estate have the rights to my house 100%.
    If I remarry, I die…would my spouse be able to gain ownership of my house/property and change it into his name?
    What is the best way to insure my daughters get what should be theirs since wills can be changed and contested by a remarried party??

  4. Laura –

    This is a common question during divorce, but I’m afraid you will not like my answer. First, you should discuss this with your family law attorney. Generally, it is frowned upon to end a marriage but still have property in the other person’s name. If it is solely in their name, you have no control over how it is devised. Similarly, you need to understand that you can only control how you dispose of the property in your name. You can not control how your ex-husband devises his property after the divorce. This is especially true because any future spouse or children he may have will have rights as well.

    We do a significant amount of post-divorce estate planning to help people understand what documents are needed. I would strongly recommend that you get a consult with an estate planning attorney who can help you accomplish your goals. Perhaps a family trust which held the property could offer a solution. A life estate may be suitable but there are significant tax and liability consequences that need to be discussed and considered. Please let us know if we can help!

  5. Laura says:

    Thank you for your help!
    Yes, by the time the divorce is final the property will be split in separate names.
    I know this is a sticky situation….it’s just very unfair to the kids. 🙁

  6. Deborah Henderson says:

    I am the eldest of a 4 parcel LE. I would like to live on my portion before my parent passes away. Is it possible to make that legal and get my address established? I don’t want to sell, I need to live there.

    I thank you in advance for your reply.

  7. Deborah,

    Several questions:

    1) Is your parent the sole (only) owner of the life estate?
    2) Is your parent competent?
    3) You mention there are 4 parcels but what are the total number of siblings?
    4) Do you have a remainder interest in all of the parcels or just one?

    Please feel free to email your responses to Tiffany@ProvenceMesservy.com if you prefer not to have your information online. I will do my best to respond in a timely fashion.

  8. diane says:

    My sisters and I were listed on my mom’s deed as life estate. Recently she sold the home and we all were given a check to split. We signed the check and gave the money back to her to purchase another home. We received a 1099 for capital gain for this. What affect will this have on our taxes, since we never really received any capital gain from the sale/

  9. Diane,

    I would recommend you contact your CPA immediately as we don’t handle taxes. What I can tell you is that unfortunately, since the home wasn’t re-deeded to solely to your mom prior to the sale, you did in fact “receive” the gain. The fact that you then gifted those funds back to your mom doesn’t change whether or not you received them in the eyes of the IRS. Does you mom have a qualified estate planner assisting her with these transactions? There are many costly complications to these transactions which make investing in an attorney a good idea. We can also assist by referring you (or your mom) to a local CPA to offer advice on how this might be remedied. Please let us know if we can help.

  10. S Brant says:

    My mom and I did a life tenancy for her (for her house) back in 2009. Now she has alzheimer’s and lives in TN not SC anymore. I’ve just been told by the hospital that we need place her (permanently in a memory care unit of a nursing home. She will enter under medicaid pending. Has no assests (other than the life tenancy which is beyond the look back period). We were planning to sell the house – if we do now does her part go to medicaid? If I put her in the nursing home under her small income and medicaid don’t I have to give up POA? How do I sell the house then? If she eventually is approved for Aid and Attendance (VA to be used in nursing home) it all goes in the overage account the home needs to create (which is fine) but again how does all of this affect the POA for selling the house – do they suddenly become her rep for selling her life tenancy?

  11. Congratulations to your mom on having the foresight to establish a life estate in 2009. For many of our clients, establishing a life estate is the simplest and best alternative for protecting a home from the estate recovery process of Medicaid. That being said, please note that the sale of the home creates an entirely different situation and will cause problems with her eligibility. Because she is a resident of TN, you need to consult with an elder law attorney in that state to understand the full ramifications as rules vary in each state based on whether certain acts are in effect (one example is the Deficit Reduction Act of 2005). As for giving up your POA, I am unaware (in SC) of a reason you would have to do so and it certainly will prohibit you from selling the home on her behalf. Definitely don’t surrender that authority until you have been given solid legal advice as it sounds from the facts that your mother would no longer be able to meet the legal capacity standards to name a POA and therefore could get caught up in the committment system if the POA is no longer in effect. While we would love to help, I think a TN attorney is your best option for all of these issues.

  12. S Brant says:

    Great information! Many thanks.

  13. Sherry Lawver says:

    My sister and I received our home place when my stepmother died in March of
    2016. She had a life estate deed. I had a home inspection done when we received the property in May. Many issues with the house including leaking roof
    in carport with wood root, termite damage, broken windows, cigarette burns in
    carpet, flea infestation, cat urine damage to flooring. This is only to mention a few. I filed a lien against her estate for $5,000. I received a notice from the attorney filed with probate that the claim is disallowed stating repairs to life estate are not the responsibility of the estate. What recourse do we have?

    Thank you

  14. LEE MARION says:

    I have an Estate for Deed in SC, to two of my children….if I remarry and abandon the home to live with my new wife, what happens to the Esrate for Deed .?

  15. Lee –

    I’m assuming that you’re referring to a “life estate deed” and that the two children hold the remainder interest. Unfortunately, without having details on how this life estate was created and whether or not there were any requirements in the creating document, I can’t fully answer your question. However, if you gave the life estate to yourself and the remainder to your children, you can simply refer to that deed to answer your question. If the life estate was created through the will of a previous owner, then that will should be referred to as it will answer your question. If there are no requirements in the creating document, then your remarriage and abandonment of the property doesn’t change your interest; however, it also doesn’t change your obligation to properly keep and maintain the property. I would suggest you locate the document that created the life estate and review it with an attorney who can properly advise you on handling this asset. Many attorneys will offer a one hour consult at a significantly reduced rate to deal with these types of issues. Attorney David Causey in our office handles most deed related questions and also offers phone consults for out of town customers.

  16. Sherry –

    First, you have a strict time limit from the time you receive that notice of disallowance so act quickly to protect your interest. Secondly, you must refer to the document that created the life estate to properly understand your rights. It sounds like this document might be your father’s will which would have determined what her rights and responsibilities are. Once you have that document, I would get a quick consult with an attorney who can tell you if it’s worth pursuing your claim in court. Many attorneys will offer a one hour consult at a reduced rate to help you determine how to move forward. David or Virginia in our office would be perfect for this. Please feel free to contact us if we can help!

  17. LEE MARION says:

    Thanks, Tiffany….guess that is a good starting point……..really want to sell the property, but dont see a way to recind the SC Estate for Deed………maybe I will just rent it out….Thanks Again, Lee

  18. Sherry Lawver says:

    Thank you Tiffany for your reply. How do I contact one the people you suggested?

  19. Sherry –

    Both David and Virginia can be reached at 843-871-9500. They share a paralegal, Maureen, who can set you up with an appointment. I hope they can help.

  20. Melinda Williamson says:

    If the life tenant is in a nursing home with 1 of the 4 remaindermen being his POA…
    1) Whose responsibility is it to pay the taxes?
    2) Can that POA sign his portion over to someone else, either one of the remaindermen or another person entirely?
    3) What recourse do the remaindermen have in the event the property taxes go unpaid and house is listed in a tax sale auction?
    4) Can one of the remaindermen use monies in the estate to satisfy their own mortgage without consent of the other remaindermen?

  21. Melinda –

    It looks as if you’ve also sent us a private email. We will answer your question via email as this is something unlikely to apply to many people. If you don’t get a response in the next 24 hours, please let us know.

    Thanks for reading our blog!

  22. kim williams says:

    My mother and I would like to enter into a life estate deed. is there a form we can fill out and file with Oconee County in order to avoid attorney’s fees, which she cannot afford?

  23. Kim,

    Unfortunately I’m not aware of a form as life estates can be a little tricky. If there is such a form the Oconee County ROD would be the best resource to ask (although most ROD offices will not offer forms or give out any legal advice). Although legal fees can seem expensive, they provide the added comfort of someone who can guarantee that your mother understands the transfer and helps prevent it from being contested later (which is much more costly).

  24. Kathleen Graff says:

    Hi Tiffany,
    I see this is an old post but hope you receive my question and are willing to reply.
    My sister purchased our family home from my parents many years ago. I found out that they attached a “Life Estate” to her paid off property title.
    The are very elderly and ill but still of fairly sound mind. I believe that they went on to use her property as collateral multiple times over the years without her knowledge. Their estate is seriously in dept. If they pass with this “Life Estate” attachment will my sisters home be swept up in probate and for dept collection? If I prepare a title application and they sign off on it and I then register the new title will that remove the “Life Estate”?

  25. Kathleen,

    Thank you for the post. The purpose of a life estate is such that the property can convey directly to the holder of the remainder (which is your sister) outside of the estate. As such, it will not be an asset of the estate and creditors of the estate can’t attach to it; however, without reviewing the documents they executed using the property as collateral, I can not make a determination of the impact they might have if they used the property as collateral as those might be enforceable outside of the estate context. I’m also not sure a document created after the property was used as collateral will remedy the situation. Lastly, I’m not familiar with a title application as you’re using it in your question. My suggestion would be that you gather any and all documents using this property as collateral and provide them to your sister. Since she was the one who purchased the property, she needs to consult an attorney individually to determine if she was in fact given the type of title she purchase and how her right were impacted by the use of the property as collateral. If she lives out of the area, may attorneys will provide a consult by phone.

  26. Billy sewell says:

    I was left a life estate that has a mortgage with it. Who is responsible to pay the mortgage? The estate or me ? The estate has plenty of funds . Thanks

  27. Billy –

    Thank you for posting to our blog. We need additional information to respond to your question. Can I assume that a will created the life estate? Who holds the remainder interest in the property? Is the mortgage solely in the decedent’s name? Was there any type of mortgage insurance? Generally, the legal document creating the life estate should (hopefully) spell out what financial obligations the life tenant has. If you would like to scan a copy of the document and email it to Tiffany@ProvenceMesservy.com I will be happy to take a look at it and provide a response.

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