Life estate

What it means

The life tenant may live in the property and must generally maintain it and pay taxes. The remainderman owns what is left when the life tenant dies.

On the life tenant's death the property passes automatically, without probate.

A traditional life estate is difficult to undo: selling or mortgaging usually requires the remainderman's agreement. Some states allow an enhanced version that keeps the owner's full control.

Why it matters

It is an old and simple way to keep a house out of probate, and it is frequently proposed to families without the constraints being explained.

It also interacts with Medicaid: creating one is a transfer, and it can affect eligibility through the look-back period.

When you are likely to meet it

• When a deed grants somebody a right to live in a property for life.
• When a parent wants a child to have the house eventually.
• When a house has to be sold and an older relative lives in it.

How this varies by state

Whether a state recognizes an enhanced life estate deed, and how a life estate is valued for Medicaid, are set by state law.

Related terms

• Look-back periodThe stretch of time before a Medicaid application during which gifts and transfers are examined, and can delay eligibility.
• Medicaid estate recoveryA state's claim against the estate of somebody whose long-term care Medicaid paid for, to recover what it spent.
• Naked ownershipOwning something in Louisiana that somebody else has the right to use.
• Non-probate assetSomething that passes to a new owner automatically, without a court.
• Real propertyLand and what is permanently attached to it — a house, a barn, a fixed structure. Everything else a person owns is personal property.
• Step-up in basisThe tax rule that resets an inherited asset's value to what it was worth on the date of death.
• Tenancy in commonCo-ownership where each owner has their own share, and that share passes to their heirs rather than to the other owners.
• Title insuranceCover against defects in ownership that already existed when the property was bought.
• Transfer-on-death deedA recorded deed naming who receives real property on death, with no probate and no present interest for the person named.
• UsufructA Louisiana right to use property and take its income, while somebody else owns it.

Sahvelo guidance that uses this

• Inheriting a mortgaged home