What is a Life Estate?
There are various forms through which a person can hold ownership in property. One such form is the life estate. If you hold property in a life estate, you retain the right to occupy, possess, and enjoy the property during your remaining lifetime. However, when you pass on, your interest in the property automatically terminates. As a result of the termination, you, as a life estate holder, cannot transfer your interest in the property through a will.
Life estates, therefore, are typically used to keep property from being transferred through the process of probate. Consider that you wish to transfer your home to your child. Without any planning, the home will have to go through the process of probate before ownership can be transferred. In order to avoid this, you could execute a new deed that reserves a life estate in the home for yourself, with a remainder interest to your child. If the deed is executed properly, the home will automatically transfer to your child upon your death.
During your life, you will be required to pay all costs, such as insurance and property taxes, as though you are the sole owner. Moreover, the child who was given the remainder estate does not have any right to the property whatsoever until you die. Often, spouses use life estates to ensure that their marital home becomes the property of the surviving spouse upon the first spouse’s death.
Importantly, a life estate cannot be revoked. Therefore, once you set up your ownership of a property in a life estate, you cannot sell or otherwise dispose of the home.