A life estate is a right to exclusive possession and use of property during one’s lifetime. Thus, when a person(called the “grantor”) gives another individual a “life estate”, the recipient (called the “life tenant”) receives many of the same rights as the owner but only for his or her lifetime. When the life tenant dies, however, the property does not go to the life tenant’s heirs or beneficiaries, it goes to a beneficiary designated by the property owner.
Examples might be a piece of property that you want your children to benefit from during their lifetimes, but once they have passed away, the property will go to charity. Another common example is a widow or a widower who remarries and wants to provide for their spouse during his or her lifetime but wants the family home to go to the children when the spouse dies. Specific conditions can be spelled out in the life estate agreement such as that the life tenant not do anything to diminish the value of the property, keep the property in good repair, pay the taxes, even not remarry.
Life estate can be useful in some areas of estate planning and can be created by a deed or by a will or trust. In addition to giving another individual a life estate interest, you can also give yourself a life estate in property you own. An example of this occurs when a mother transfers her home to a child but retains the right to live there until her death.
A lifetime right of occupancy is similar however the use of the property is only while the individual is actually occupying the property. As an example, if a widower remarried and wanted his new wife to be able to live in the home he owned and they shared, after his death, he could give her a right of occupany during her lifetime. If she moved out or went into assisted living or a nursing home, the right of occupancy is terminated.
Setting up a life estate or a right of occupancy can be tricky because of the many variables that are possible. If you are considering one of these as part of your estate plan, please contact us for more information or to schedule a complimentary consultation.