Pros and cons of a life estate

Here is a general overview of the benefits and burdens of a life estate:

Real estate taxes: It is the general rule that the life tenant is responsible for paying all property taxes during his or her lifetime; if the document creating this estate is silent on rent, the life estate holder does not have to pay any rent.

Ordinary repairs, upkeep and maintenance: These are the responsibility of the life tenant; that person lives in the house and it is his or her obligation to preserve the property.

Improvements: This question comes up often. "I, the life tenant, want to make improvements to the house. Who pays for this?"

Ordinarily, a life tenant has no right to make permanent improvements to the home. If they are made, without the consent of the remainderman (i.e., the person who gets the property at the end of the life estate), it is at the expense of the life tenant. However, it is the obligation of the life tenant to make all of the necessary repairs so as to preserve the property.

Homeowners insurance: Unless specifically spelled out in the will, the life tenant is responsible only for insuring his or her interest, while the remainderman has the obligation to insure the remainder interest. Sounds complicated and confusing, but the insurance carriers can assist in resolving this.

Can the life tenant move out and rent the property? The law provides that a life tenant is entitled to both the possession and use of the property. Included in this "use" is the right to rent the property to another, and keep the rent money. However, any such rent would be taxable income to the life tenant.

Can the life tenant sell the interest? The answer is yes, but the potential buyer would get only what the seller has -- namely an interest that would end when the seller dies.

What rights does the remainderman have? The courts seem to treat a life estate as they do tenants. The general principles give the life tenant the right to peaceful possession without interference from the remainderman.

However, if it appears that the life tenant is not properly maintaining the property, he or she would have the right to inspect and make any necessary repairs. This may require court action.

There may be tax consequences of giving a life estate, and you have to discuss this with your own tax advisers.