With an aging population, an increasing number of people find themselves in the position of creating a legal life estate that allows another person, called the life tenant, to live in the owner's home for as long as he wants until death. When the life tenant dies, possession of the property passes to the owners. This type of arrangement is popular with children who have aging parents, for example, since a child can take ownership of the house, but still allow an aging parent to live there for the rest of her life. But what rights and responsibilities do life tenants have while living in the property?
During tenancy, the life tenant is responsible for paying all bills, including mortgage payments, utilities and all other aspects of upkeep. Lawn maintenance and landscaping are also the responsibility of the tenant, as are any repairs to the house's plumbing or electrical systems. Most importantly, they are responsible for paying all associated taxes and for maintaining enough homeowner's insurance to protect the property against any damage. The owner of the property, known as the remainderman, will take over all of these responsibilities upon the life tenant's death, but until that time, the person living in the house assumes expenses as any homeowner does.
A major obligation the life tenant has to the remainderman, or owner, is to prevent deterioration of the property while living there. This includes damage, neglect, misuse or any alterations that could negatively affect the value of the home. A life tenant who stops paying the mortgage could be considered destructive to the property, since it puts the owner at risk of losing the property.
A life tenant also has the right to rent out part or all of the property and to collect income from those rentals, but still has the responsibility of making sure the property's value remains intact. All taxes on rental income are the responsibility of the life tenant, as is any increase in homeowners insurance that comes from having a rental property. Rental arrangements could put the owner in a sticky situation if he wants to evict a renter after the life tenant dies. Local laws that protect tenants may require the remainderman to serve the renter with legal notice and a court suit.
A life estate offers homeowners the ability to will a property to someone else while allowing a third party to remain in the home for the duration of his life. It's important to understand the complications that come with life tenancy, though, so you can work everything out in advance.