Obligations Of Life Estate Owners
What is a life estate? According to Black’s Law Dictionary, a life estate is “a freehold estate, out of inheritance, but which is held by the tenant for his own life or the life or lives of one or more other persons, or for an indefinite period, which may endure for the life or lives of the persons in being, and not beyond the period of a life”.
One typical scenario is for a spouse to convey real property “to my spouse for life, remainder to my children in equal shares”. In this instance, the spouse would hold an estate in the real property for a period of the spouse’s lifetime, and upon death, the property would be transferred to the children by operation of law. During the lifetime of the spouse, the children have a vested remainder in the real property and are classified as “remaindermen”.
What obligations do life estate holders have with regards to the real property?
First, they have a duty not to commit “waste”. Waste occurs when the life tenant destroys, misuses, alters, or neglects the property which diminishes the value of the land for the remaindermen. Hausmann v. Housmann, 231 Ill App 3d 361, 367, (5th D 1992). Also, importantly, waste includes failure to pay real property taxes. Surprisingly, a life estate holder does not have an affirmative duty to insure the property. Therefore, if you represent clients who hold a remainder interest in real property, it is best to advise them to make sure the property is insured, and not to assume that the life estate holder has done so. Life estate holders have the duty to make ordinary repairs, but not extraordinary repairs.
Typically, a life estate holder can use the property in any manner, which includes the right to income and profit from the property. This also includes farming, harvesting timber (to repair rather than resale).
As stated above, a life estate lasts only for the indefinite period of a lifetime. Once the life estate holder dies, the property is automatically transferring to the remaindermen by operation of law. Generally, to evidence the transfer, an affidavit of death is recorded in the public land records, along with a death certificate.
Although once a very popular legal mechanism, life estates are currently not as common as they once were. This is because they are relatively inflexible. In order to sell the property, the remaindermen need to consent. This can be difficult if there are several remaindermen, who may be scattered across the globe. Also, a life estate holder is permitted to partition the life estate only, and not the reamindermen’s interest. Thus, unless the parties are all in agreement, which is unlikely, the life estate holder may be trapped into living on the property, even though that may be not ideal.
If you have yet to plan your estate, it is wise to speak with a lawyer, like an estate planning lawyer in Belgrade, MT from Silverman Law Office, about your best options.