A life estate is a form of ownership where a person (we will call this person “John”) owns a piece of property for their life and upon John’s death the property passes to someone else. When creating a life estate John picks exactly who he wants the property to go to upon his death and lists that person in the deed (we will call this person “Rose”). The legal term for John is a “life tenant” since John’s property rights in a standard life estate are limited to living in and using the property during John’s lifetime. The legal term for Rose’s interest is that of a remainder so we call Rose a remainderman. Once John passes away, Rose gets the property by operation of law in fee simple. The way that tax and property appraiser records are updated is by the recording of the death certificate of John.

There is also what is called an Enhanced Life Estate or Lady Bird deed. An Enhanced Life Estate works very similarly to a standard life estate with one very important difference. John is treated still as a life tenant but also more like a typical owner with the right to sell, convey, mortgage or otherwise manage and dispose of the property in fee simple without joinder of the remainderman and with full power and authority to retain any and all proceeds from the sale. In a standard life estate John would need Rose to join in to do any of these things and Rose would be entitled to proceeds from any sale or refinance of the property.

In sum, life estates are wonderful estate planning tools, which often accomplish the avoidance of probate, but be careful that you are choosing the right form of life estate for your particular needs.