A remainderman’s rights in a life estate are:
- Remainderman has the right to ownership over the property under life estate only upon life tenant’s death.
- Property in a life estate cannot be sold, mortgaged, or otherwise encumbered by the life tenant without the remainderman’s consent.
- Remainderman has the right to ensure that the life tenant maintains the property and pays the property taxes, mortgage payments, and homeowners insurance.
- When the remainderman dies before the life tenant, the remainderman has the right to pass on his interest to his estate, or if there are joint remaindermen, to his estate or the remaining joint remaindermen, depending on the language of the source document.
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Application of a life estate
A life estate is created either by deed, will, or trust. In a life estate, a grantor transfers property to the remainderman, subject to the life estate of the life tenant. Here, the remainderman has a future interest, but cannot take possession of the property until after the death of the life tenant. The life tenant has the right to use, occupy, possess, and receive rent from the property, but cannot sell, mortgage or encumber the property without the consent of the remainderman. Life estate is an easy and cheap way to transfer property to the next generation without going through probate.
Most cases of life estate in deeds involve two parties, a parent and a child, where the parent is the grantor and the life tenant, while the child is the remainderman. Typically, the parent-grantor will transfer legal ownership of his property to the grantee-remainderman-child, subject to the life estate of the parent-grantor-life tenant. In this case, although it is an easy and economical way to transfer wealth to the next generation, it can create problems when the parent-grantor-life tenant has other children who are not named as remainderman. The deed creating the life estate can be contested by the other siblings after the death of the parent-grantor-life tenant.
Life estates in wills and trusts usually have three parties: the deceased spouse as grantor, the surviving spouse as life tenant, and the children as remaindermen. Sometimes, the grantor is a parent, the life tenant is the child, and the remaindermen are the parent’s nieces and nephews. In life estates in wills and trusts, the grantor, life tenant, and remaindermen are usually related to each other. However, this is not always the case. Charitable institutions have also been named as remaindermen. It all depends on the provisions of the will or trust.
If you are a remainderman, here are some of your rights.
Ownership of the property after life tenant’s death
As a remainderman, your right to use and possess the property can only begin after the death of the life tenant. Even if you are considered the legal owner of the property, it is generally the life tenant’s responsibility to maintain the property and pay property taxes, mortgage payments, and homeowners insurance premiums. If there is a contrary provision in the source document, however, the source document (will, deed, or trust) will prevail as long as it’s not against the law or public policy.
Right to ensure life tenant maintains property
Corollary to the life tenant’s responsibility to maintain the property and pay mortgage payments, property taxes, and homeowners insurance premiums, the remainderman has the right to enforce the life tenant to live up to these responsibilities. The life tenant should not commit any act that could diminish the remainderman’s interest in the property.
Right to consent to any sale, mortgage, or encumbrance during life of life tenant
Even if the remainderman gets the use and possession only after the death of the life tenant, the remainderman must consent to any mortgage or encumbrance made by the life tenant. For this reason, most lawyers advise grantor-life tenants to refinance the property before executing a life estate deed.
A life estate deed is an irrevocable document. Once done, it cannot be changed anymore. In case the grantor-life tenant needs the property to fund an unexpected expense (such as a medical operation), the grantor-life tenant needs to obtain the remainderman’s consent for a mortgage. This can be problematic especially if supervening events occurred after the execution of the life estate deed that resulted to strained relations between the grantor-life tenant and the remainderman.
The remainderman’s consent may not be needed in a sale by the life tenant of his interest in the property. This means that sale of the life tenant’s interest is limited to such interest, and the buyer only takes the property as a life tenant, subject to the remainderman’s interest. The life tenant cannot sell the entire property free of the remainderman’s interest without the consent of the remainderman.
If the remainderman consents to the life tenant’s sale of the entire property, case law varies from state to state regarding the distribution of the proceeds. Generally, however, the life tenant’s interest is computed based on his life expectancy which is calculated using an actuarial life table.
When the remainderman dies before the life tenant
When the remainderman dies before the life tenant, the remainderman’s estate gets the property. This is because a life tenant is not and cannot be the remainderman.
In case of joint remaindermen, however, the source document (either deed, trust, or will) may state whether the estate or the surviving joint remaindermen get the property in case a remainderman dies before the life tenant. If the source document is silent, most states consider the property transferred to the predeceased remainderman’s estate because case law favors the least transmission of rights.
Although a remainderman has limited rights during the life of the life tenant, the remainderman can request the court for the life tenant to specifically perform his obligations of maintaining the property and paying the mortgage payments, property taxes, and insurance premiums of the property. If the remainderman suspects that the life tenant is wasting or diminishing the value of the property with its occupation, the remainderman can request for a temporary restraining order, prohibiting the life tenant from the commission of certain acts.
The remainderman also has significant power in withholding its consent to the life tenant’s mortgage or encumbrance of the property. If the remainderman consents to the sale of the property, most states distribute the proceeds between the life tenant and the remainderman, based on a computation of the life tenant’s life expectancy.
Remaindermen have rights in a life estate, even if the life tenant is still alive. Though limited, these rights can be enforced in court. If you are a remainderman or life tenant who has questions regarding the life estate deed and your rights, we at the law offices of Albert Goodwin are here for you. We are located in New York, NY. You can call us at 212-233-1233 or send us an email at [email protected].