As a real estate professional, there are a few things you should know about Life Estates.
What is a life estate?
A life estate is an interest in property in which one party (the life tenant) owns a current possessory right in property and another party (the remainderman) owns a future possessory right to property.
Grandma owns a farm in Bedford County. She deeds the property to her son (the remainderman) but Grandma (the life tenant) retains the right to live in the home until her death. Upon death, the full interest in the property is transferred to the son and he owns the property outright, subject to any liens or encumbrances. No documentation is required- the transfer occurs upon the death of Grandma by operation of law.
There are several important consequences to creating a life estate. For one, the life tenant is not going to be able to mortgage or sell the property without the remainderman’s permission. Second, life tenants have the duty to keep the property in good condition but cannot necessarily enjoy the equity in property realized from a sale or mortgage. Third, a Life Estate is a type of property interest. This means that the Life Tenant is required to sign the Purchase and Sale Agreement, Deed, and possibly other closing documents.