Life Estates In Texas – Until Death Do I Part

Life Estates In Texas – Until Death Do I Part

A life estate is an interest in real estate whereby the grantor of the deed (the life tenant) retains the exclusive (no one else has right without permission) right to occupy and use the real estate (often a homestead) for life. The deed would indicate that the grantor/life tenant retains a life estate. The grantee of the real estate (the remainderman) takes possession at the death of the grantor (life tenant).

So, for example if a parent wants a child to own the real estate (i.e., homestead) after the death of the parent, then a life estate deed can be used to avoid probate. Typically, the remainderman brings a death certificate or signs an affidavit of death to the appraisal district to show change of ownership. However, unlike enhanced life estate deeds and transfer on death deeds, both parties (the life tenant and the remainderman) would need to agree if the property was to be sold or mortgaged due to the remainderman’s immediate remainder interest.

Obligation and Rights of Remainderman During Lifetime of Life Tenant:

  1. Pay the mortgage principal (a real estate lien note)
  2. Right to sell their remainder interest – but not the entirety of the property (both life tenant and remainderman are needed to sell the entirety of the property)
  3. Right to take life tenant to court if life tenant fails to maintain the property or commits waste or reduces the property’s value

Rights and Obligations of Life Tenant During Lifetime:

  1. Exclusive use & occupancy of property
  2. Rent the property & get the income or get royalties
  3. Pay the utilities
  4. Pay the property taxes
  5. Pay the mortgage interest
  6. Keep property in good condition (repairs and maintenance)
  7. Maintain homestead exemption (if the property was life tenant’s homestead)

Creation by Will or Trust:

Life estates can also be created in a will or trust whereby the testator (the one who makes the will) or the trustor (the one who makes the trust) grants a life estate to a beneficiary. This is common in second marriages whereby the testator or trustor gives the surviving spouse the right to exclusive occupancy and use of the homestead and then passing to the testator’s or trustor’s children after the death of the surviving spouse. Even if the surviving spouse moves out of the property, it is not considered an abandonment unless he or she fails to maintain the property, pay the property taxes, utilities and mortgage interest, etc.
Life Estate Granted on Someone Else’s Life:

A grantor of a deed could give a life estate interest on someone else’s life and be a remainderman. So, if the grantor wanted the grantee to maintain the property, have exclusive right to the property, perhaps occupy it as a homestead for lower property taxes, etc., then a deed could name that grantee as the life tenant and the grantor could be the remainderman.

Ladybird Deeds & Transfer on Death Deeds:

A ladybird deed is an enhanced life estate deed whereby the grantor retains control. Similarly, a transfer on death deed can be cancelled. As a result, it should not be necessary for both the grantor/transferor and remainderman to sell the property as the grantor/transferor should be entitled to all of the proceeds. Furthermore, since the grantor of a ladybird deed or the transferor of a transfer on death deed retains control, it is not a penalized event if made within 5 years of a Medicaid application unlike a deed of life estate without enhanced powers (sell, mortgage, change grantees, etc.) which would result in a transfer if made within 5 years of an application.

If interested in learning more about this article or other estate planning, Medicaid and public benefits planning, probate, etc., attend one of our free upcoming Estate Planning Essentials workshops by clicking here or calling 214-720-0102. We make it simple to attend and it is without obligation.

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