Unit 4 - part 2 Flashcards
What is Life Estate?
A life estate is a free hold estate limited in duration to either the life of the holder of the estate or the life of some other designated person(s) and it’s not inheritable.
The holder of life estate is called life tenant. A life tenant is entitled to the rights of ownership and can benefit from both possession and ordinary use, and profits arising from ownership.
The life tenant’s ownership may be sold, mortgaged, or leased, but it is always subject to the finite limitation of the life estate.
What are types of life estate ownership?
- Conventional Life Estate
2. Legal Life Estate
What are types of conventional life estate?
- Pur Autre Vie
2. Ordinary with Remainder and Reversion
What is pur autre vie life estate?
Although a life estate is not considered an estate of inheritance, a life estate pur autre vie (for the life of another) provides for inheritance of the property right by the life tenant’s heirs, but the right exist only until the death of the identified person(s).
(for example, physically or mentally incapacitated)
What happens when life estate ends?
When the life estate ends, it’s replaced by a fee simple estate. The future owner of the fee simple estate may be designated in the one of two ways:
- Remainder interest - The creator of life estate may name a remainder man as the person to whom the property will pass when the life estate ends.
- Reversionary interest - If the creator of life estate didn’t name a remainderman, ownership returns to the original owner upon the end of the life estate.
What is Legal Life Estate?
Is life estate establish by state law, not by a property owner.
What are types of legal life estate?
- Dower (life estate of a wife in the RE of her deceased husband.)
- Curtesy (life estate of a husband in the RE of his deceased wife.)
Dower and curtesy provide a non-owning spouse with a means of support after the death of the owning spouse.
- Homestead
What is a homestead life estate?
A homestead is a legal life estate in RE occupied as the family home. The home is protected from most creditors (but not a mortgage) during the occupant’s lifetime. A family can have only one homestead at the time.
How does the homestead exemption actually work?
In most states, the homestead exemption merely reserves a certain amount of money for the family in the event of a court sale. In a few states, the entire homestead is protected.
Once a sale occurs, any debts secured by the home (a mortgage, unpaid taxes, or mechanics’ liens) will be paid from the proceeds. Than the family will receive the amount reserved by the homestead exemption. Finally, whatever remains will be applied to the family’s unsecured debts.
