A life estate is the ownership of land for the duration of a person's life. In legal terms, it is an estate in real property that ends at death, when ownership of the property either reverts to the original owner or passes to another person.
Let’s explain this using the story of a life estate, creatively modified so that you can pass your exam. As you learn in your real estate books, real estate law comes from English common law. So let's start with the king. If you read your history books, you’ll know that the king was not always the nicest guy in the world and, sometimes, the king did some pretty horrible things. This made a lot of people angry, so the king needed protection.
Money was a difficult commodity back then. It was awkward and hard to maintain. But property, property was worth everything! If you had property, you were a big deal. So the king made a proposal. He said, “Defend me!” But the people said, “Absolutely not, you're a horrible person and there’s no way we are defending you”. The king then replied, “Defend me and you'll be rich, I will give you land!” To which many people said, “Well, now that’s a great deal, okay let's do this.” But, like with everything, there was a catch.
The king said “If I die you will no longer have the property,” to which the people replied, “So... I have the property for the duration of your life?” And the king replied “Yes, if I stay alive you will remain rich and powerful! If I die then you are poor. You have this estate for the duration of my life, so let's call it a life estate.”
In our story, the person who had the property is known as the holder of the life estate. And the king has the estate in reversion, which means that if the person dies, the land reverts back to the king.
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If the king dies, then the property logically goes to the prince, who would then hold the estate in remainder.
Let’s talk about this in more practical terms.
As we discussed, a life estate is an interest in land that lasts for the life of the life tenant. The holder of a life estate has full rights to possess the property during their life. A life tenant can sell their interest to a third-party, but this means that the third-party buyer of this life estate interest will only have an interest in the property until the original life estate-holder dies. Then the property ownership goes back to the "remainderman", who is a designated third-party in the life estate deed. If there is no third-party remainderman designated in the life estate deed, property ownership reverts back to the grantor, or the grantor’s estate.
A life tenant pays all property costs, applicable taxes, and insurance while in possession of the property. The holder of a life estate cannot leave the property to anyone in their will because their interest does not survive upon death. They also cannot commit waste or harm the property in a manner that would prevent the property from passing to the remainderman after their ownership is terminated.
One common example of how a life estate can be used is to provide housing for someone until they die. Sometimes a child transfers a property to their parent for the rest of that parent’s life. After the parent dies, ownership of the property reverts back to the child. In this situation, the child owns a "reversionary right" to the property.
Another example would be if a mother created a life estate deed to give her younger husband a life estate in the property, assuring that he will always have a place to live. She could stipulate in the deed that the remainder goes to her son after her husband dies. Her son would then be known as the “remainderman” for that life estate.
I hope this helps clarify what a life estate is and how it can be used. Until next time, remember to keep it concise and keep it simple.