Life Estate - Uses of A Life Estate

Uses of A Life Estate

In the United States, a life estate is typically used as a tool of an estate planning. A life estate can avoid probate and ensure that an intended heir will receive title to real property. For example, Al owns a home and desires that Bill inherit it after Al's death. Al can effectuate that desire by transferring title to the home to Bill and retaining a life estate in the home. Al keeps a life estate and Bill receives a vested fee simple remainder. As soon as Al dies, the life estate interest merges with Bill's remainder, and Bill has a fee simple title. Such transfer of interests make unnecessary the use of a will and eliminates the need to probate the asset. The disadvantage to the grantor, however, is that the grant to the remainderman is irrevocable. "Beneficiary deeds" have been statutorily created in some states to address this issue.

It is less well known that the intestacy laws of certain American states, such as Arkansas, Delaware, and Rhode Island, still limit the surviving spouse's rights to the deceased spouse's real estate to a life estate (as shown by the programs linked to the state names). Louisiana employs a similar mechanism in successions called usufruct.