What Is the Meaning of Lifetime Estate on a Deed?

By Jennifer Kiesewetter, J.D.

What Is the Meaning of Lifetime Estate on a Deed?

By Jennifer Kiesewetter, J.D.

A lifetime estate on a deed is a type of property ownership. It gives an individual the right to occupy and use a property during that individual's lifetime. The individual occupying and using the property is a life tenant. After the death of the occupant, the life estate terminates and transfers to another person, known as the remainderman.

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This form of property ownership guarantees that they cannot be forced to move from his or her home. The remainderman cannot live in the property during the life tenant's occupancy of the home unless they previously consent. During occupancy of the home, the occupant pays all property taxes and maintenance costs on the house.

Creating a Life Estate

The individual who creates the life estate is the grantor. Through a deed, the grantor creates a life estate allowing the life tenant to live in the home and naming a remainderman to receive the property when the occupant dies. The deed is typically recorded with the county government office that handles real estate records.

A grantor can also create a life estate. Through a will, a grantor establishes a trust naming the life tenant and the remainderman. State law governs how a grantor created a life estate. These laws can vary from state to state.

Responsibilities of Life Tenants

Under a life estate, a life tenant has the exclusive right to occupy the property during their lifetime. While occupying the home, they must pay property taxes and maintenance costs. Additionally, the occupant must make all repairs to the property. If they cannot afford the property taxes or maintenance costs, the remainderman can opt to pay these expenses.

Advantages of a Life Estate

A life estate creates several advantages. For example, upon the life tenant's death, the property transfers seamlessly to the remainderman. During that time, the grantor files the death certificate with the county's property records office. This transfer occurs immediately and isn't subject to probate.

Additionally, if the life tenant decides not to live in the home, they can rent out the property and receive the rental income. This rental opportunity only exists during their lifetime.

Finally, a life estate creates peace of mind knowing that the life tenant can live in the house for the remainder of their lifetime. This security serves as an additional benefit.

Disadvantages of a Life Estate

Few drawbacks exist when creating a life estate. However, a grantor should consider some potential considerations that could negatively impact this type of property ownership.

For example, a grantor should understand all implications when creating a life estate as it's irrevocable. Although not impossible, it's difficult to alter a life estate once created. Additionally, if a life tenant moves into an extended care facility within five years after the creation of the life estate, Medicaid can force the sale of the home. Finally, if the remainderman passes away before them, the property may be subject to probate.

Tax Considerations for a Life Estate

Creating a life estate generates specific tax considerations. For example, depending on the facts and circumstances of a particular transaction, a life estate could result in income taxes, estate taxes, capital gains taxes, or gift taxes. Before creating a life estate, you should have an attorney review any tax considerations.

If you're thinking about creating a life estate, you should consult with an attorney or use an online service provider for assistance. Although you may want to take advantages of a life estate, understanding the in's and out's of a life estate is beneficial.

This portion of the site is for informational purposes only. The content is not legal advice. The statements and opinions are the expression of author, not LegalZoom, and have not been evaluated by LegalZoom for accuracy, completeness, or changes in the law.