Some people, rather than giving property outright to someone in their will or trust, would rather just let the beneficiary live there until the beneficiary dies. This type of gift is called a “life estate.”
A life estate is an interest in real property that is usually measured by the person holding it (the “life tenant”). (Sometimes it is measured by the life of another person, in which case it is known as a “life estate per autre vie”). Once the measuring life ceases (i.e., the beneficiary dies), the property passes to someone else (the “remainder beneficiary”).
Although life estates are less common today, they are still sometimes used in estate planning. Here is a common example: Husband owns the residence as separate property and has children from a prior marriage. Upon death, Wife is allowed to live in the house until her death by means of a life estate. When Wife dies, Husband's children receive the house.
Does a life tenant have the same rights as an owner?
Not quite. The life tenant can use the property like an owner, but they are forbidden from committing “waste” (conduct that reduces the value of the property). The purpose of this is to preserve the property's value for the remainder beneficiaries.
Do conflicts ever arise?
Yes, this situation can quickly lead to conflict between the life tenant and the remainder beneficiaries. Both parties may disagree over whether “waste” is being committed. Or the remainder beneficiaries may want to sell or rent out the house. Or there might be disagreement between the parties about the terms of the life estate. Sometimes the remainder beneficiaries would rather pay the life tenant to leave, and sometimes you have to go to court to resolve the dispute.
If you're thinking of granting a life estate to a beneficiary, you should consider doing so through the medium of a trust rather than a will. A revocable living trust will allow you to plan for greater flexibility in the case of unforeseen circumstances that occur during the period of the life estate. Preventing inheritance disputes is an important goal in estate planning.
Helix Law Firm can help with estate planning
If you would like to set up an estate plan, Helix Law Firm can help. We can discuss your goals and help come up with a plan that works for you, including, if necessary, the granting of a life estate in real property to one of your beneficiaries.
If you're interested in learning more, please call us at (619) 567-4447 to schedule a free consultation.