Life estates in Colorado are legal instruments that are used to transfer interests in real property from owners to recipients. The recipients are referred to as life tenants.
The life tenant gets all of the benefits of owning the property for their lifetime. After the life tenant passes away, the property will return to, or revert back to, the remainderman. The remainderman may be the original owner or another party.
Under life estate law, life estates are limited in duration to the lifetime of the life tenant. In some cases, the length of the life estate may depend on the lifetime of someone else, such as a spouse or child of the property’s original owner.
The property that is the subject of a life estate may be transferred to another person other than the original owner after the life tenant passes away. Any limitations or restrictions on the transfer are typically outlined in the written document that governs the transfer.
How Is a Life Estate Created in Colorado?
In Colorado, life estates are typically created by agreement between the property owner and the designated life tenant. This is usually done through a written document, similar to how written contracts are used to make other types of agreements.
In certain situations, life estates can be created in an individual’s will. If this happens, when the holder of the life estate passes away, the property is transferred to the survivors of the original owner.
To find out more about how life estates are created in Colorado, it is important to schedule a Colorado lawyer consultation.
How Does a Life Estate Work in Colorado?
It may be helpful to review an example to understand how a life estate works in Colorado. Suppose Person Y is married to Person Z. Person Y owns Blackacre, where Y and Z both live. Person Y provides in a deed that Blackacre will go to Person Z for life, then to Person A, the remainderman.
Then, suppose Person Y passes away and Person Z is allowed to occupy, possess, and enjoy Blackacre. Whenever Person Z passes away, the property will automatically pass to Person A. As previously noted, Person A is the remainderman, or the person who the property passes to when the life tenant dies.
Colorado lawyers can further explain these concepts to their clients as well as whether a life estate may be a helpful legal tool for their needs.
In Colorado, Why Might an Individual Want a Life Estate?
A life estate may be useful in Colorado for a number of reasons, including tax planning, avoiding probate, and providing protections for the life tenant. Life estates can help with tax planning, as the property is an asset of the owner’s estate.
This can allow their heirs to inherit on a step-up basis, meaning that they inherit the property at the value determined on the date of their parents’ death instead of the date when the property was purchased. This can help them avoid having to pay capital gains tax if the property value is not greater at the time it is sold.
Life estates can be used to avoid probate because the property passes through to a beneficiary without going through the court system. When someone passes away, property that is in their name alone may have to go through probate, a potentially time-consuming and expensive process that can cause stress for their beneficiaries and heirs.
Life estates can also provide protections for life tenants. There are many people who use them as a tool to make sure their loved ones have somewhere to live for the rest of their lives.
How Is a Life Estate Terminated in Colorado?
In Colorado, life estates let holders possess and use property during their lifetime. This means that they will usually terminate when the life tenant passes away. Once this happens, the property will go back to the original grantor if they are still living or to their estate if they are not.
Sometimes, life estates can be terminated before the life tenant dies. This can happen if the life estate document had conditions that must be met for the life tenant to keep the property. For example, a life estate agreement may provide that the life estate will terminate if the life tenant does not complete routine lawn care.
These types of conditions are up to the owner of the property. It is important to note, however, that they do have to be valid under state and local laws to be enforceable. In other words, a condition cannot force a life tenant to engage in illegal activities.
Types of Life Estate Property Disputes in Colorado
In Colorado, life estates can be favorable transfers, especially if someone has an interest in the property reverting back to its original owner. Because they are complicated in nature, however, life estate arrangements may result in different types of property disputes.
One common dispute that arises related to a life estate is the duties of the property owner. For example, life tenants have to fulfill various duties, including protecting the property from encumbrances and resolving certain real estate tax issues. If the life tenant does not fulfill these obligations, it can harm the future interest of the remainderman and is usually legally considered waste.
Others examples of life estate property disputes can include, but are not limited to:
- The property owner’s duties
- The identification, location, or description of the property
- A dispute about who is the proper life tenant or remainderman
- Whether or not the life tenant is permitted to sell or transfer their interest in the property to an heir or other interested party
Most of these life estate disputes may be resolved using proper and clear drafting of the life estate agreement. This typically requires the assistance of a lawyer.
Typically, a life estate dispute can be resolved using a civil lawsuit. These types of lawsuits can result in damages awards for the life tenant or the remainderman, depending on the losses that occurred.
Remedies for Life Estate Property Disputes in Colorado
There are various remedies that may be available in Colorado to resolve life estate property disputes, such as:
- A monetary damages award for losses caused by waste or mismanagement of property
- An injunction issued by a court that requires transferring or surrendering the property
- Rewriting or revising the life estate contract documents
The specific remedy that is awarded depends on the nature of the dispute. Sometimes, multiple remedies are awarded.
Do I Need a Colorado Lawyer for Help With Life Estate Property Disputes?
Yes, it is very important to have a Colorado estate lawyer if you have any issues with life estate property disputes. In some situations, life estate disputes can only be resolved in court due to the complexity of the legal issues.
Your estate lawyer will review your situation, look at your life estate documents, and give you advice on how you can proceed with your issue or dispute. You can avoid life estate disputes by having help from a Colorado lawyer when you are drafting life estate documents.
You can use LegalMatch today to find an estate attorney in your area of Colorado who can help you create your life estate or resolve any disputes you have related to your life estate.
