What is a Life Estate? Explanation of Life Estate Deeds
A life estate deed is a deed form used to transfer property to one party automatically upon another party’s death. The life tenant’s interest is called a life estate. The interest that passes to the remainder beneficiary is called a remainder.
A life estate deed involves three categories of owners:
- Current Owner (Grantor) – The person who is creating the deed is called the grantor.
- New Owner (Life Tenant) – The person who will hold the property for his or her lifetime is called the life tenant.
- Future Owner (Remainder Beneficiary) – The person who will acquire the property when the life tenant dies is called the remainder beneficiary or remainderman.
Similarly, the same party may serve in multiple roles. In many cases, the grantor and the life tenant will be the same person. For example, Peter may create a deed transferring his property to himself, as life tenant, with the remainder to Paul and Mary. The effect of this deed is to transfer Peter’s property to Paul and Mary when Peter dies.
The creation of a life estate deed can be tricky. It is important to include the right language to create the life tenant relationship. If multiple parties will serve in the same role—for example, if there are multiple life tenants or multiple remainder beneficiaries—it is important to also include language that defines the relationships within that role.
The deed forms prepared by our Deed Generator were designed by licensed attorneys to include the language needed to create a valid life estate deed.
Comparison to Other Deed Forms A life estate deed is not the only way to transfer property at death. Property that is titled as tenancy by the entirely or titled as joint tenants with rights of survivorship will also transfer property to a surviving owner at death. With these forms of co-ownership, the owners hold title at the same time.
A life estate deed is also a form of co-ownership. Both the life tenant and the remainder beneficiary have real interests in the property. But unlike other forms of co-ownership, they do not have property rights at the same timeas each other. Instead, their interests are stacked in time. Only the life tenant has a right to current possession of the property. The remainder beneficiary’s interest does not begin until the life tenant’s death.
Life Estate Deeds and Lady Bird Deeds
Life estate deeds are often used to avoid probate. There is no need to probate the life tenant’s estate in order for the remainder beneficiary to acquire title to the real estate. To establish title to the property, the remainder beneficiary can simply file the life tenant’s death certificate in the land records.
There are a few downsides to using traditional life estate deeds to avoid probate. Once the transfer is made, the remainder beneficiary has a real, enforceable property right. The life tenant cannot simply change his or her mind.
For example, if the life tenant wants to sell the property later, the remainder beneficiary must consent to the sale.
To avoid these problems, some states allow the use of a special deed form called a Lady Bird deed form. (In some states, the technical name is enhanced life estate deed.) Like a traditional life estate deed, a Lady Bird deed avoids probate on the death of the life tenant. But unlike a traditional life estate deed, the life tenant may freely deal with the property during his or her lifetime without the remainder beneficiary’s involvement. In fact, the life tenant may even change the remainder beneficiary or undo the life estate arrangement, all without the remainder beneficiary’s consent. This flexibility often makes a Lady Bird deed a popular alternative for avoiding probate.
Consult an estate planning or Medicaid planning attorney before using any of these methods mentioned in this article
