Does a Life Tenant Own the Property in New York?

Yes, but not all of it. Under New York law, a life estate splits ownership of one property between two people. The life tenant owns a present interest: the right to live in, use, and rent the property for the rest of his or her life. The remainderman owns a future interest and becomes the full owner automatically when the life tenant dies, without probate.

Neither person owns the whole property alone. That is why neither can sell, mortgage, or change the arrangement without the other. New York's Estates, Powers and Trusts Law (EPTL Article 6) classifies the life estate as a present estate and the remainder as a future estate. Both are recognized property interests that can be valued, transferred, and reached by creditors.

Written by Albert Goodwin, Esq., New York estates and probate attorney, Law Offices of Albert Goodwin.

Who Owns What: Life Tenant vs. Remainderman

How a Life Estate Is Created in New York

Most life estates in New York come from a life estate deed. The typical version is a parent who deeds the house to one or more children and reserves a life estate. The parent keeps the right to live there for life. The children receive the remainder. The deed must clearly reserve or grant the life interest. Language conveying the property "subject to a life estate" in a named person is generally enough.

A life estate can also be created by will or trust. A common example is a will that leaves the house to a surviving spouse for life, with the remainder to children from a prior marriage. In that case the surviving spouse is the life tenant and the children are the remaindermen.

A reserved life estate deed is irrevocable. Once it is signed and recorded, the parent cannot take the house back, add a buyer, or name different remaindermen without the remaindermen signing a new deed. Some states recognize an "enhanced life estate" or "lady bird" deed that lets the life tenant sell without the remaindermen's consent. New York has no statute authorizing that type of deed, and you should not assume one will work here.

Since July 2024, New Yorkers can also use a transfer on death deed under Real Property Law § 424. A TOD deed is revocable and gives the beneficiary no interest until death, so it works differently from a life estate in several respects, including Medicaid planning. Our page on avoiding probate in New York compares these options.

Rights and Duties of the Life Tenant

As a life tenant, you control the property during your lifetime. You may:

• Live in the property, or let family members live there.
• Rent it out and keep all of the rental income.
• Make improvements at your own expense.
• Sell, lease, or give away your life estate. The person who receives it holds the property only until you die. Few buyers want that kind of interest.

Those rights come with obligations to the remainderman. In general, the life tenant pays:

• Property taxes: ordinary annual real estate taxes.
• Routine upkeep: ordinary repairs needed to keep the property from deteriorating.
• Mortgage interest: interest on any mortgage that existed when the life estate began. Principal and special assessments for permanent improvements are usually apportioned between the parties.

Insurance is often overlooked. Absent an agreement, a life tenant generally has no legal duty to insure the remainderman's interest. Each party can insure his or her own interest. Families should make sure the homeowner's policy names both parties, because a fire can leave an uninsured remainderman with nothing.

Property Tax Exemptions: STAR, Senior, and Veterans

For property tax exemption purposes, New York generally treats a life tenant who lives in the home as its owner. A parent who keeps a life estate can usually continue to receive the STAR benefit under Real Property Tax Law § 425, the senior citizens exemption under RPTL § 467, and veterans exemptions, if the income and residency requirements are still met. Recording a life estate deed can trigger a review by the local assessor. Check with the assessor, or with the NYC Department of Finance for property in the five boroughs, after the deed is recorded so a benefit does not lapse by mistake.

Waste: What a Life Tenant Cannot Do

A life tenant may not reduce the value of the remainderman's future interest. Doing so is called waste. RPAPL Article 8, beginning at § 801, allows a person holding a remainder to sue a life tenant for waste. Conduct that can support a claim includes:

• Failing to pay property taxes, which exposes the property to a tax lien foreclosure.
• Letting the property fall into serious disrepair.
• Demolishing structures or removing fixtures.

A court can award damages for waste and, in limited circumstances, the statute permits forfeiture of the life estate. A remainderman does not have to wait until the life tenant dies to protect the property.

Rights and Risks of the Remainderman

The remainderman owns a vested future interest from the day the deed is recorded. Before the life tenant dies, the remainderman may sell, give away, or leave that interest by will. The remainderman may not move in, collect rent, or force the life tenant out.

Because the remainder is the remainderman's property, the remainderman's personal problems can reach it:

• Creditors: a judgment against the remainderman can become a lien on the remainder interest. The lien does not displace the life tenant, but it attaches when the remainderman takes full ownership and can block a sale in the meantime.
• Bankruptcy: a remainder interest is generally property of the remainderman's bankruptcy estate, and a trustee may try to sell or settle it.
• Divorce: property received as a gift is usually separate property under Domestic Relations Law § 236(B), but the remainderman's spouse may still be involved if the house is sold, and the remainderman's own actions can change that classification.
• Death of the remainderman first: if the remainderman dies before the life tenant, the remainder passes under the remainderman's will or by intestacy. That can require a probate or administration proceeding and can leave the life tenant sharing the property with in-laws or grandchildren.

A parent considering a life estate deed should weigh these risks. Naming several children multiplies them, because every remainderman must sign before the house can be sold or refinanced. See also borrowing against inherited property.

Life Estates and New York Medicaid

Medicaid planning is the most common reason New Yorkers set up a life estate. A parent who expects to need nursing home care may deed the house to the children while keeping a life estate.

The Five-Year Look-Back

Transferring the remainder interest is a gift. For nursing home Medicaid, New York reviews transfers made during the 60 months before the application. A gift of the remainder within that window can cause a penalty period during which Medicaid will not pay for nursing home care. The amount of the gift is the value of the remainder interest, which is calculated using the parent's age at the time of the transfer and a life estate table. New York has also enacted a look-back for community-based home care Medicaid, but implementation has been delayed. Confirm the current rule before relying on it.

The planning advantage is timing. If the deed is signed and recorded more than five years before the parent applies for nursing home Medicaid, the transfer is outside the look-back.

Medicaid Estate Recovery

After a Medicaid recipient dies, New York may seek repayment from the recipient's estate under Social Services Law § 369. New York currently limits estate recovery to the probate estate. A life estate ends at the life tenant's death and passes nothing through probate, so the house is generally beyond the reach of estate recovery.

Medicaid Risks to Watch

• If the house is sold while the parent is alive, the parent's share of the proceeds belongs to the parent. That money is an available resource and can affect eligibility.
• Rental income the life tenant receives counts as income for Medicaid.
• Reserving extra powers in the deed, such as a power to sell or to change remaindermen, can cause the property to be treated as still belonging to the parent.
• The deed cannot be undone without the remaindermen's consent, and undoing it can itself create a new transfer.

Consider a common situation: a widowed parent in Queens signs a life estate deed to two children at age 72 and stays in the house. At 79 the parent enters a nursing home. Because the transfer happened more than five years earlier, it does not create a penalty, and when the parent dies the children take the house by recording a few documents. If the same parent had signed the deed at 77, the gift of the remainder would fall inside the look-back and could delay coverage. Medicaid planning depends on individual facts, so treat this as an illustration, not a prediction. For broader planning, see asset protection in New York.

Tax Consequences of a Life Estate

When the Deed Is Signed

Deeding the remainder to children is a gift for federal tax purposes. A gift of a future interest does not qualify for the annual exclusion, so the parent generally must file a federal gift tax return, IRS Form 709, for the year of the transfer. In most families no gift tax is owed, because the gift is applied against the parent's lifetime exemption. New York has no separate gift tax.

At the Life Tenant's Death

Because the parent kept the right to live in and use the property, Internal Revenue Code § 2036 includes the full value of the property in the parent's estate for estate tax purposes. That inclusion has a benefit: under IRC § 1014, the remaindermen receive a basis equal to the property's fair market value at the date of death. If they sell soon after, they often owe little or no capital gains tax. Most estates fall below the federal and New York estate tax exemptions, but the property still counts toward the New York threshold.

If the Property Is Sold During the Life Tenant's Lifetime

A lifetime sale gives up the step-up. When the life tenant and remaindermen sell together, the sale price and the original basis are allocated between them using the IRS actuarial tables and the IRC § 7520 rate for the month of sale. The remaindermen take a carryover basis under IRC § 1015, which is their share of the parent's original cost. On an older home that often means a large taxable gain.

The life tenant's share may qualify for the home sale exclusion under IRC § 121, up to $250,000 for a single filer, if the life tenant owned and lived in the home as a principal residence for two of the five years before the sale. The remaindermen usually cannot use the exclusion unless they also lived there. Run these numbers before agreeing to sell, because they often change how the parties want to split the proceeds.

Selling Property Subject to a Life Estate

The simplest path is a voluntary sale in which the life tenant and every remainderman sign the deed and agree on how to divide the proceeds.

When they disagree, either side may ask the court to order a sale under RPAPL § 1602. The petitioner must show that a sale is expedient. In Matter of Sauer, 194 Misc 2d 634 (Sur Ct, Nassau County 2002), citing Matter of Gaffers, 254 App Div 448, the court found a sale expedient where the price was well above the appraised value, the house was vacant, rental income would not cover the taxes, and the life tenant faced large ongoing costs for taxes, insurance, and maintenance.

When property subject to a life estate is sold by court order, RPAPL § 967 lets the court compensate the life tenant out of the proceeds in a way that protects the interests of all parties. The life tenant's share is usually computed from life expectancy using an actuarial table. New York courts, including the Appellate Division, have accepted the life estate and remainder table published by the federal Health Care Financing Administration (now CMS), and the IRS § 7520 tables are another accepted method. Each side typically bears its share of closing costs, transfer taxes, and broker commissions. Sale disputes have their own procedure. See our pages on partition of real property and buyouts of an inherited residence.

Clearing Title After the Life Tenant Dies

The remaindermen become full owners at the moment of death. No probate proceeding is needed for the property. To make the change clear in the public record and to sell or refinance later, the remaindermen usually:

1. Obtain a certified copy of the life tenant's death certificate.
2. Prepare an affidavit identifying the deceased as the life tenant named in the recorded deed and confirming the death.
3. Record those documents with the county clerk, or with the City Register through ACRIS for property in New York City.
4. Notify the assessor, the insurer, and any lender, and apply for exemptions in their own names if they qualify.

A title company insuring a later sale may ask for more, such as proof that no estate tax is due or that any lien was satisfied. If a remainderman died before the life tenant, that remainderman's estate may need letters testamentary or letters of administration before the property can be sold. An affidavit of heirship is sometimes used for related title questions.

Frequently Asked Questions

Can a life tenant sell the house without the remainderman?

The life tenant can sell only the life estate itself. Selling the whole property requires every remainderman's signature or a court order under RPAPL § 1602.

Can a life tenant revoke a life estate deed?

No. A New York life estate deed is irrevocable. Changing it requires the remaindermen to sign a new deed, which can have gift tax and Medicaid consequences.

Can the remainderman evict the life tenant?

No. The life tenant has the right to possess the property for life. The remainderman's remedy for neglect is an action for waste, not eviction.

Does Medicaid take a house with a life estate in New York?

Under New York's current estate recovery rules, which reach only the probate estate, a life estate that ends at death is generally not subject to recovery. The transfer of the remainder can still trigger a penalty if it falls within the five-year look-back.

Who pays the property taxes?

Generally the life tenant. Unpaid taxes can be the basis of a waste claim by the remainderman.

Speak With a New York Life Estate Attorney

A life estate deed is permanent and affects Medicaid eligibility, taxes, and family relationships for years. If you are considering one, or you are a life tenant or remainderman facing a dispute, we can help. The Law Offices of Albert Goodwin has offices in New York City, Brooklyn, and Queens. Call 212-233-1233 or email [email protected].

This page provides general information about New York law and is not legal advice for any specific situation.