Life estates are often encountered by reverse mortgage professionals during the origination process. Reverse professionals should have a good understanding of what a life estate is in order to guide their clients and transaction to a successful closing.
A life estate is a type of ownership interest in real estate. In a life estate one person is given an ownership interest in real estate for their lifetime. This person is called a life tenant. At the death of the life tenant, the real estate passes automatically to one or more other individuals or organizations. The people or organizations that receive the property at the death of the life tenant are called remainderman.
It is important to understand that a life estate is a form of co-ownership. Both the life tenant and remainderman each have an ownership interest in the real estate, but at different periods in time. Unlike other forms of co-ownership, the co-owners do not have rights to the property at the same time. Rather, the life tenant possesses the property during their life. The other co-owner, the remainderman, holds a current ownership interest in the property but cannot take possession of the property until the death of the life tenant.
Read more about life estates by accessing our educational flyer below:
Title Tidbits Life Estates