Sale of a Life Estate
I recently had a potential client come and ask me what happens when property is sold that is subject to the life estate. My answer to her was it depends (I know, a typical lawyer answer).
The reason it depends is that it depends on who is selling the interest in the property. With a life estate, there are two real property interests involved. The first interest is the holder of the life estate itself. A life estate gives the holder the right to use the property until their death. Upon death, the property automatically transfers to the remaindermen, the second property interest involved.
If only the holder of the life estate sells their interest, then the buyer is only buying a right to use the property during the life of seller. They could be buying it for a day or for many years, no one knows. A valuation specialist usually must be brought in to value the life estate, which is based upon the age of the holder of the life estate. Again though, the buyer is only buying a right to use the property during the life of the seller, not forever. Upon the seller’s death, the rights in the property then pass automatically to the remaindermen.
In order to fully purchase the property so that the buyer owns the property outright, both the holder of the life estate and the remaindermen need to be parties to the transfer. They each need to transfer their respective property interests to the buyer.
If you have any questions in regards to a life estate, please consult an estate planning attorney to discuss the life estate further.
