Life Tenant Defined
A life estate grants a person, otherwise known as the life tenant, the right to use property during his life. After the life tenant passes away, the property is automatically transferred “as is” to another person without having to go through probate. The life tenant is responsible for maintaining the property while she owns its. The life tenant’s use of the property is subject to restriction; she cannot sell the property or act in a way that would diminish the value of the property without the consent of the individuals who will own the property after her.
Donor as Life Tenant
Many times a person creates a life estate with themselves as life tenant. A donor may do this for numerous reasons, such as for medical benefit purposes or to ensure the property goes to the individuals she wants without tying the property up in probate. In the context of a person’s passing, many may associate the term beneficiary as someone who receives property subject to a will. More broadly, a beneficiary is anyone who is named to receive assets from a legal device that distributes property. So if the life tenant is the original donor of the property, her beneficiaries would be defined by the document creating the life estate and not her will.
Life Tenant as Recipient
If the life tenant was granted use of the property by another, she does not get to define who receives the property after her. Who receives the property after the life estate is defined by the person who created the life estate in the first place and transferred the property to the life tenant.
Role of Exeuctor
An executor’s role is to initiate the probate of a decedent’s will, collect and inventory the assets and distribute the property to the appropriate beneficiaries. While the property subject to a life estate is supposed to legally transfer automatically after the tenant passes away, the practical issues of moving out the decedent’s property and ensuring the physical transfer may fall largely on the executor.
Appreciation of the Property in Life Estate
When the life tenant passes away and the property is transferred, the beneficiary obtains the property at the market value of the property at the time of the decedent’s death. This should include all appreciation that may have occurred during the life tenant’s use of the property. If the life tenant was the one who created the life estate in the first place, the entire value of the property is included in the estate for estate tax purposes only; however, the property is still excluded from the estate for probate purposes.