Creditor & Life Estate Deed

Deed

A deed is a written document used to convey interest or title of real property from one party to another. Some deed forms specify the terms of the title transfer, limiting the rights given to the grantee, or the party receiving the deed. The life estate is a limited form of real property ownership.

Life Estate Deed

When deeded a life estate, the grantee's ownership of the property is limited in time, based on the life of the grantee or another person. When that person dies, the property conveys to another person, specified in the life estate deed. While the grantee of a life estate can use the property, he is unable to will the property. Therefore, the value of the life estate for the creditor is limited to the lifetime of the estate.

Uses

Estate planners sometimes use life estates. For example, to protect property from future creditors or reduce inheritance expenses, a parent might create a life estate whereby the parent continues to reside on the property for her lifetime, and at her death the property coveys to her children. During the life estate, her interest and rights in the property are much less than prior to creating the life estate. Another use of the life estate is to allow one party to occupy the property for his lifetime, yet deny him the right to will the property, instead reverting it to the remainderman after his death.

Life Estate Responsibility

The holder of the life estate must maintain the property. Should the holder of the life estate destroy the property, the person who will eventually own the property or the remainderman can seek an injunction against the holder of the life estate and sue for damages. The tenant of the life estate has limited ownership rights. Yet, the tenant can generate income with the life estate, and that income might be vulnerable to the tenant's creditors.