life estate

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Life Estate

Real estate owned only for the duration of one's life, at which time it reverts to the original owner. The owner of a life estate, called a life tenant, has all rights associated with ownership of property except the right to sell the property. Upon the death of the life tenant, the life estate reverts back to the owner, or to a third party designated by the owner. For example, in a will, a farmer may grant ownership of his farm to his children, subject to the life estate of their mother. In this situation, the mother holds the life estate and has the right to live in the farm house for the rest of her life. A life estate may be included in one's gross estate.
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life estate

The right to use and enjoy real estate for a limited time measured by someone's life— either the owner of the life estate or someone else. Often used as an estate planning tool so that elderly people can sell their property or give it to relatives,but still retain the right to continue living in it.

Example: Mary Smith, who is 85 years old, has a life estate in Blackacre, but it's for the life of 10-year-old Ashley Brown. As a result, Mary and her heirs will be able to use the property until Ashley dies, hopefully some time in the distant future.

The Complete Real Estate Encyclopedia by Denise L. Evans, JD & O. William Evans, JD. Copyright © 2007 by The McGraw-Hill Companies, Inc.
References in periodicals archive ?
Life estates, reversions, remainders, and annuities (other than commercial contracts--see Q 603) are valued according to estate and gift tax valuation tables (see Q 909).
2004) (treating waste issues in context of life estate, reversion, remainder, joint tenancy and co-tenancy).
2000) (adverse possession commenced during term of life estate is not binding on holder of remainder following life estate; separate adverse possession against holder of remainder after it becomes possessory would be necessary); Ebersol v.
For purposes of IRC Section 2036 (retained life estates) and IRC Section 2038 (revocable transfers), but not IRC Section 2042 (life insurance), the IRS states that it will not include property in a grantor's estate because of the retained power to replace a trustee with an independent corporate trustee.
Under prior law, wife would receive a total of $500,000 of assets from husband, comprised of an elective share of $300,000 (30 percent of $1 million elective estate) in addition to either a life estate or one-half tenants in common interest in the homestead valued at $200,000.12 If the residence was owned by husband and wife as tenants by the entireties, however, wife would only receive assets totaling $360,000 (30 percent of $1.2 million elective estate), which was satisfied by husband's 50 percent interest in the residence valued at $200,000 and an additional $160,000 of cash and securities.
Remainder interest transactions have taken advantage of the fact that property interests can be divided between life estates (i.e., the right to the use of property for life) and remainder interests (i.e., the right to ownership of property once the life estate of another has terminated).
At one time, a surviving wife was entitled to a life estate interest in a portion of real property owned by her deceased husband, a right called a "dower." A "curtesy," on the other hand, represented a husband's right to a life estate interest in a portion of his deceased wife's real property.
If the older generation is charitably inclined, it might consider using an often overlooked strategy: The charitable life estate. This article will discuss some of the advantages of this planning technique.
Gifting a remainder interest requires the property ownership to be divided into two separate interests: a life estate and a remainder interest.
The father purchases a life estate (or term interest) in the painting or unimproved real estate.
But a terminable interest, such as a life estate in a trust created by someone other than the person receiving it, generally does not qualify.
[section][section]20.2031-7 and 20.7520-1 through 20.7520-4, such a life estate is determined by multiplying the fair market value of the marital trust(s) assets subject to the life estate(s) (16) by an actuarial factor set forth in Table S of IRS Publication 1457 as determined by the "Section 7520 rate" (i.e., 120 percent of the federal midterm rate in effect under [section]1274(d)(1) at the transferor's death) and the age of the transferee spouse on the date of the transferor spouse's death.