How to Create and Terminate Life Estate

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 What Is a Life Estate?

According to both common and statutory law, a life estate definition would be a form of joint property ownership. It allows one person to remain in their home until their death, at which time the home passes to the other owner. A legal life estate is created by the person who owns the property (or, the grantor), and it is given to the recipient (or, grantee).

A life estate example would be if an adult child states in their estate planning documents that they grant their named parent the right to live in their real property, until the parent’s death. Another example would be including that the named parent may also receive rental income from the grantor’s property, until the grantee’s death.

Life estates are most commonly utilized to convey property between relatives, or close friends. These arrangements are useful for situations in which the property may be used by another for an extended period of time, but the owner wishes for the property to revert to their own possession for legal purposes. The most attractive feature of a life estate is the fact that the property will return to the original grantor, which is referred to as a “reversion.”

As such, the holder of a life estate is generally entitled to use the property during their lifetime; however, they will not be able to transfer it to their own heirs upon their death.

How Is a Life Estate Created? How Is a Life Estate Terminated?

It is relatively simple to create a life estate. The grantor will need to create a written document in which they indicate that they are conveying property for the length of someone else’s life. A conveyance is the transfer of an interest in real property, such as a home or commercial real estate. Conveyance occurs when a grantor uses words of conveyance in order to transfer an interest in property to a grantee. Therefore, a life estate is a type of conveyance and is created in much the same way.

Generally speaking, the writing used will take the form of the following language: “I, Party A, convey my real property to Party B, for life.” This writing is usually contained within a deed or a will. It is important to note that the exact language requirements for creating a life estate may differ between states.

A life estate can be terminated upon the death of the tenant, or grantee. However, life estates can also be cut short. This can happen in several ways, some examples of which include:

  • The life tenant commits impermissible waste, or, “overt and willful acts of destruction” leading to the drop in property value; or
  • The life tenant violates a condition that has been attached to the life estate. Grantors may attach any written conditions that they wish to the conveyance of a life estate, so long as the conditions are not unlawful. An example of this would be how a life estate conveyance may read, “To Party B for life, provided that Party B maintains the inground swimming pool located on the premises and keeps it in good repair.” Party B has a life estate, and will maintain that life estate, for as long as Party B abides by the condition placed by the grantor.

How Is the Length of a Life Estate Measured?

The most common type of life estate, which is the type created by words of conveyance, is measured by the grantee’s life. When the life tenant (or, Party B) dies, Party A has the right of reversion. What this means is that upon Party B’s death, the property reverts back to Party A. If at that point Party A has also died, the property goes to Party A’s heirs.

Some life estates are also known as “life estates pur autre vie.” “Pur autre vie” means “by someone else’s life.” Once again, such estates are created by a grantor conveying the property to another. To continue the example, this would be “To Party B.” However, Party B’s lifetime would not be the unit of measurement for how long Party B holds the life estate. Rather, another person’s lifetime would be how the length of the life estate is to be measured.

In general, a life estate pur autre vie reads, “I, Party A, convey the property to Party B, for the life of Party C.” It is when Party C dies, not when Party B dies, that Party B’s life estate would be terminated. At that time, the property would then revert to Party A. Party C is referred to as the “measuring life,” because their life serves as the measurement of the duration of Party B’s life estate.

What Are the Obligations of a Life Tenant?

During the duration of the life estate, a life tenant is generally entitled to all uses and profits from the land. The purpose of these obligations is to not impair the rights of those who will own the property subsequent to the life tenant’s ownership.

However, because the life tenant does not have any rights to transfer the property when the life tenant dies, they may not commit waste. In legal terms, there are three different kinds of waste. The first is referred to as voluntary or affirmative waste, as previously mentioned. This type of waste is any act that causes the property to lose value.

Generally speaking, a life tenant may not commit “permissive waste”. What this means is that the life tenant may not neglect their obligation to keep the premises in reasonably good repair.

The third type of waste is known as “ameliorative waste.” This refers to engaging in acts that will enhance the property’s value. The rules governing ameliorative waste differ between states. While some states require that any property changes are only to be made with the consent of the grantor or any other party who may have an interest in the property, other states are more lenient. These states have determined that the life tenant may make reasonable improvements, as long as the grantor or anyone else with an interest in the estate does not object to the improvements.

The life tenant has other duties in addition to the duty not to commit waste. These duties generally include:

  • Ensuring all ordinary taxes on the land are paid, in terms of income or profits from the property;
  • Ensuring that real estate taxes are paid; and
  • Protecting the property from liens or other encumbrances.

Should I Seek Legal Counsel Regarding a Life Estate?

If you wish to create or terminate a life estate, you should consult with an experienced local estate lawyer. As you can see, state laws can vary widely in terms of how a life estate may be governed. Because of this, someone local to you will best understand your state’s laws regarding the matter and how those laws may affect your legal options. An experienced attorney can help you legally create and/or terminate a life estate, as well as represent you in court, as needed.

Alternatively, if you are the recipient of a life estate, an attorney can represent you should any disputes arise. They will protect your rights throughout the process, and will provide any defense available should you be accused of violating a life estate.

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