How to Remove Someone From a Life Estate

Life estates can provide effective means to create joint ownership of property, avoid probate and transfer property after death without incurring estate taxes. However, removing someone from a life estate can be challenging because each party named in the deed typically holds a legal interest in the property. Once a life estate is created, all involved parties must agree to any changes in ownership. In some cases, removal may be possible through mutual consent, a court order or a deed revision, depending on state law and the specific terms of the agreement.

A financial advisor with estate planning experience can help you decide whether a life estate aligns with your family’s goals and explore alternatives.

What Is a Life Estate?

Life estates allow two or more people to have joint ownership of a property. One person, called the life tenant, has ownership for as long as he or she lives. The other person called the remainderman, takes possession after the life tenant’s death. Both life tenant and remainderman can be multiple people.

Although the remainderman doesn’t have full possession of the property until the life tenant dies, the remainderman does have an interest in the property. To protect those interests, the life tenant is normally not allowed to take various actions, including selling the property or taking out a mortgage on it, without the remainderman’s consent. Since the property doesn’t go through probate under a life estate, it supersedes a will.

The remainderman also has to agree to any change in the person or persons named as remainderman. If there is more than one remainderman, as may be the case with a couple with multiple children, all the remaindermen would have to agree to remove or change the names on the life estate.

It can be difficult to obtain the consent of the remainderman for major changes, especially involving the removal of a remainderman’s name. However, sometimes it’s desirable to make a change. For instance, if a remainderman becomes heavily indebted, it’s possible that creditors could pursue the remainderman’s interest in the home should the remainderman fail to repay debts. The possibility of a remainderman’s divorce or bankruptcy could make it desirable to remove or change the names on a life estate.

Because of the irrevocable nature of a typical life estate, planners need to consult with an attorney specializing in estates when setting one up. Also, since different states have different requirements for life estates, the attorney should be familiar with local laws.

Power of Appointment

One way to get around the requirement for the remainderman’s approval is to use a testamentary power of appointment. This is a clause in a will that allows the life tenant to change the person to whom the property will be bequeathed after death. Invoking a power of appointment won’t make the life estate invalid. The life tenant still won’t be able to, for instance, sell the property without the remainderman’s permission.

It does give the life tenant the ability to negotiate with the remainderman from a stronger position or to change to a more agreeable remainderman. However, it has to be set up in advance.

Alternatives That Add Flexibility to a Life Estate

Another way to add flexibility to a life estate is through a nominee realty trust, a revocable trust that holds legal title to real estate. When a property owner creates one, a new deed transfers ownership to the trust, which then names beneficiaries. This is similar to how a life estate names remaindermen.

Unlike other trust structures, a nominee realty trust allows the grantor to direct the trustee’s actions, including changing who will receive the property after the life tenant’s death. This feature provides flexibility that traditional life estates lack, as the trustee can modify beneficiaries at the grantor’s request without dissolving the trust.

As with powers of appointment, the nominee realty trust must be established when the life estate or property transfer is first created. It does not invalidate the life estate but can make it easier to adapt to changing family or financial circumstances. Because rules for nominee trusts vary by state, working with an attorney familiar with local trust law is recommended.

Removing a Life Tenant

Sometimes a remainderman has an interest in terminating the interest of the life tenant. This is potentially much easier to do than removing or changing the remainderman. However, the life tenant has to do something to justify the change.

Along with the right to occupy the property during his or her life, the life tenant has the right to receive rent from it and to change or improve the property, as long as the property isn’t diminished in value. The life tenant has responsibilities as well, including paying taxes, maintaining the property and avoiding the placement of any liens on the property.

If the life tenant doesn’t fulfill these responsibilities and causes or allows the property to lose value, the remainderman may be able to have the life tenant’s interest terminated by court order.

A remainderman can petition a civil or probate court to remove a life tenant who has:

Allowed the property to fall into disrepair or lose value
Failed to pay property taxes or insurance
Encumbered the property with liens or debts
Violated restrictions outlined in the life estate deed

The court may terminate the offending party’s interest or, in rare cases, order the sale of the property and division of proceeds according to each party’s ownership value. This process can be lengthy and costly, and typically requires strong legal justification.

Reversing a Life Estate

There is no simple way to reverse a life estate because a life estate deed is a legal transfer of the title of a property. This is legally binding and the transaction is complete when the life estate is executed.

Essentially, in order to reverse a life estate both parties would need to agree to make it happen. You can’t reverse it on your own as a single party of the transaction.

Bottom Line

Life estates can let people transfer property to heirs while retaining the right to live in or use the property. They can also help manage taxes, avoid probate and serve other estate planning needs. However, life estates are generally considered irrevocable and require the permission of the remainderman before the life tenant can sell or borrow against the property. Likewise, the life tenant has to agree to any changes in the remainderman. Powers of appointment and nominee realty trusts can avoid this obstacle, but they must be prepared in advance.

Tips on Estate Planning

Before entering into a life estate, it’s imperative to have a good understanding of your financial situation. That’s where a financial advisor can be helpful. Finding a qualified financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.