Detailed Answer
Overview of a Life Estate
Under California law, a life estate grants a lifetime beneficiary (the life tenant) the right to possess and use real property for the duration of that person’s life. A life estate arises when a property owner conveys or devises land to someone “for life.” California Civil Code § 110 defines an estate for life as one that lasts for the tenant’s lifetime. Cal. Civ. Code § 110.
Rights and Duties of the Life Tenant
- Possession and Use: The life tenant may occupy, control and enjoy the property during his or her lifetime.
- Income and Profits: The life tenant may collect rents or profits generated by the property.
- Duty to Avoid Waste: The life tenant must maintain the property and may not commit voluntary or permissive waste that harms the remainderman’s future interest.
- Transfer Limit: The life tenant may transfer only the life estate. Any transferee’s interest ends when the original tenant dies.
Determining Remainder Interests
A remainder interest is a future interest created when a will or deed names a remainderman to receive the property after the life estate ends. Under Cal. Probate Code § 30, interests in property created by a will vest at the testator’s death. California law then classifies remainders as:
- Vested Remainder: An unconditional, fixed future interest in the remainderman. It becomes possessory immediately upon the life tenant’s death. See Cal. Probate Code § 31 for definitions of vested interests.
- Contingent Remainder: A future interest that depends on an event or condition precedent (for example, “to Charlie for life, then to Dana if she graduates from college”).
Example: John’s will states, “I leave Blackacre to Alice for life, then to Bob.” Alice holds a life estate. Bob holds a vested remainder that becomes possessory when Alice dies.
Helpful Hints
- Confirm that your deed or will clearly identifies the life tenant and remainderman.
- Consult an attorney when drafting a life estate to avoid unintended tax or gift-tax consequences.
- Understand that a life estate may affect Medi-Cal eligibility for long-term care benefits.
- Consider alternatives (such as living trusts) to achieve similar goals without creating a life estate.
- Keep accurate records of rents, repairs and maintenance during the life estate.