WHAT IS 'Life Estate'

A life estate refers to property that is owned by an individual only through the duration of their lifetime. A life estate is restrictive in that it prevents the beneficiary from selling the property that produces the income before the beneficiary's death. But the estate cannot continue beyond the life of the beneficiary.


A life estate is the vehicle by which the property owner, or the grantor, transfers legal ownership to another person, or the life tenant. In many cases, the grantor and the life tenant are the same person, but not always. Typically, the deed will state that the occupant of property is allowed to use it for the duration of their life. Almost all deeds creating a life estate will also name a remainder man, the person or persons who get the property when the life tenant dies. 

Life Estate Details

A major benefit of a life estate deed is that it can be used to pass property upon the life tenant's death without it being part of the life tenant’s estate. As a result, the property does not have to go through probate. Any interest that the life tenant had in the property ended upon death and did not become a part of the life tenant’s estate.

One complicating factor to life estate deeds, especially in real estate dealings, is that all parties need to be aware of the fact that both the life tenant and the remainder man have ownership interests, despite each having different right of possession. The life tenant is the owner of the property until they die. However, the remainder man also has an ownership interest in the property while the life tenant is alive. As a result, the life tenant is legally responsible for maintaining the property. 

Life estates are often created by people who believe their beneficiary could benefit more from the income from the estate than a lump-sum inheritance. Many times, such estates are invested in various income-producing instruments, such as bonds, CDs, oil and gas leases, REITs and other similar investments.

However, should the life tenant want to sell or mortgage the property prior to death, the remainder man would have to consent agree and sign off. As part of the transaction, the remainder man could demand a portion of the proceeds based on a predetermined scale reflective of the life tenant’s age and current interest rates. Typically, the older the life tenant, the greater the share that the remainder man can expect to receive.

Notable, too, is that any legal problems that a remainder man incurs may affect the life tenant as well. For example, if a child is sued or owes taxes, a lien could be filed against their parent’s home if a life estate has been established between the two. 

  1. Sublease

    A sublease is the renting of property by a tenant to a third ...
  2. Real Property

    Real property is a term commonly used in land law to denote any ...
  3. Expansion Option

    An expansion option is the capacity to add or broaden activities ...
  4. Tenancy at Sufferance

    Tenancy at sufferance is a legal circumstance when a property ...
  5. Estate Planning

    Estate planning is the preparation of tasks that serve to manage ...
  6. Estate

    An estate is the collective sum of an individual's net worth, ...
Related Articles
  1. Insurance

    How to Avoid Taxation on Life Insurance Proceeds

    Decrease the value of your taxable estate and prevent the tax man from getting you one last time.
  2. Managing Wealth

    Life Expectancy: It's More Than Just A Number

    Find out how life expectancy determines your life insurance premiums and affects your payout.
  3. Investing

    Simple Ways to Invest in Real Estate

    Owning property isn't always easy, but there are plenty of perks. Here are some ways to invest in real estate.
  4. Investing

    How To Rent Out Your Spare Room

    If you have extra space in your house, why not rent it out, especially during the school term, to help pay the mortgage?
  5. Investing

    A Guide to Real Estate Investing

    Investing in real estate is a popular choice for good reasons, but it's more complicated than owning your typical stocks and bonds.
  6. Insurance

    Life Insurance: Foundation to a Solid Portfolio

    Life insurance should be a foundation of an overall financial portfolio. Here's why.
Trading Center