What Happens To A Life Estate After Death?

A “life estate” occurs when a person has a legal right to use property during life, but does not own the property outright.

That person is called the “life tenant.” After the death of the life tenant, the property passes to the named beneficiaries, called “remaindermen.”

Can you inherit a life estate?

In the United States, a life estate is typically used as a tool of an estate planning. A life estate can avoid probate and ensure that an intended heir will receive title to real property. For example, Al owns a home and desires that Bill inherit it after Al’s death.

Who owns the property in a life estate?

A life estate deed is a legal document that changes the ownership of a piece of real property. The person who owns the real property (in this example, Mom) signs a deed that will pass the ownership of the property automatically upon her death to someone else, known as the “remainderman” (in this example, Son).

What are the benefits of a life estate?

Benefits of a Life Estate

  • The right to live in the home until death;
  • Maintaining a $250,000 capital gains exclusion provided you resided in the home two (2) of the last five (5) years;
  • The right to keep a portion of the sale proceeds of the house if it is later sold;
  • The right to rental income;