• Kelly O'Brien

Life Estates in Montana

Effective Use of Life Estates in Estate Planning For Blended Families


The idea of the “typical” American family has changed significantly over the last several decades from the traditional nuclear family to blended families of countless variations. Modern families much more variety then the traditional husband and wife with two children. Now-a-days, a blended family, or a family where one or more spouse has children from a prior marriage is commonplace.


A married couple with children from a prior marriage may face unique challenges when it comes to estate planning, especially if the couple is living together in a home they acquired prior to their marriage. All too often couples simply decide to leave everything to each other without considering how it may impact their children or create conflict in the future.

While we all would like to believe that our family members will all get along after we are gone, we all know that life can change. Your spouse may remarry, get sick or simply just not get along with your children. A life estate can be an easy way to address some of these issues without requiring the creation of a complex estate plan.


What is A Life Estate?


First, it is important to understand the basic definition of a life estate and how it is created. A life estate is an interest in land whereby an owner of real estate grants another individual (known as the “life tenant”) title of the property for the lifetime of the life tenant. The individual that possesses the life estate has an interest in the property for their lifetime only. Upon the life estate owner’s death, the remaining interest in land is passed to another individual(s) or entity (“remainder interest” holders or “remaindermen”). The person possessing the life estate interest may live on the property, use it, and otherwise benefit from it for their lifetime in a reasonable manner as they see fit.


The typical rights of a life tenant during his or her lifetime include:

  • Residing on the property;

  • Renting the property to a third party and collecting the rent payments;

  • Making profits from the land including profits from farming the land or timber harvesting (unless previously granted to a third party); and

  • Receiving a portion of sale proceeds if the real estate is sold (up to the value of the life estate).

The typical responsibilities and obligations of a life tenant during his or her lifetime include:

  • Maintaining the property and avoiding waste to the property;

  • Paying real estate taxes and insurance;

  • Paying any other fees, dues or utilities;

  • Paying any mortgage and interest costs.

Creation and Documentation of a Life Estate

A life estate can be created by a deed, an agreement, or though a will or trust. It is important that the document conveying the life estate is specific in any limitations that the grantor may intend. Otherwise, without specific language limiting or expanding the rights and responsibilities of the life tenant then the default rights and responsibilities of a life tenant listed above apply.


For example, if a grantor wants the life tenant to be able to reside on the property for his or her lifetime, but not rent the property to a third party, then the grantor must include specific language limiting the nature of the right to “live” or “reside” on the property. This language would create “limited life estate” or “right to reside,” which has very different rights and responsibilities.


Similarly, if the grantor wanted the remaindermen to pay the taxes and maintenance costs, rather than the life tenant, the granter must be specific in the conveyance document or agreement to transfer these obligations to the remaindermen.


A life estate can also be granted or sold to another person, or it may be reserved by the individual owning property for his or her lifetime. By retaining life estate interest in one’s own property an individual can enjoy the property for the remainder of his or her life, but transfer the property to another individual or entity upon death.


Use of a Life Estate in Estate Planning

A life estate can be a highly effective estate planning tool if properly documented and discussed with all involved. For a blended family a life estate can help to ensure that property would pass to children while allowing a spouse to reside on the property for his or her lifetime. Similarly, an owner of real estate can retain a life estate allowing the owner to continue to reside on the property for his or her lifetime while passing property to children, charities or other individuals upon death. The use of a life estate can also help to avoid a separate probate proceeding upon the death of the life tenant.


If you are considering granting a life estate to a spouse or child, or retaining a life estate for yourself talk with your family about your intent for the life estate to make sure your intentions are clear. Also make sure to discuss your plans with your financial, legal and tax advisors to ensure that your intentions are properly documented and carried out.


Seek Legal Advice

Before you proceed to grant or retain a life estate interest either through your estate plan or by a separate agreement discuss it with your attorney. It is important for you to consider your assets, family situation, and personal preferences carefully to ensure that it fits in with your overall estate plan. Moreover to ensure that your intent for your property is properly documented in a manner to meet your goals, discuss the following issues with your attorney:

  • What happens if the life tenant vacates the property? Can he or she rent the property to a third party and collect payments or does it pass to the remaindermen?

  • Who pays for regular maintenance costs?

  • What maintenance is required of the life tenant?

  • Who is responsible for major improvements? Who makes decisions regarding major improvements?

  • What insurance is required by the life tenant and the remaindermen?

  • Are the remaindermen permitted to inspect the property or otherwise enter the property during the lifetime of the life tenant? If so, when and how is entry permitted?

  • Who is responsible for taxes, insurance and other fees and costs?

Again, without specific language setting out the rights and responsibilities of each party the life tenant would have the responsibility for most of the expenses during his or her lifetime and benefit from the property during his or her lifetime. A life estate can be a valuable planning tool without the need for a complex estate plan. However, it is important that you involve your family and advisors in the process.


If you have questions or need legal assistance regarding life estates, estate planning or other real estate matters, contact Kelly O’Brien at Measure, Law, P.C. at (406) 752-6373/ www.measurelaw.com

128 Second Street East
Kalispell, Montana 59903

406-752-6373 

406-752-7168 fax

Measure Law is a Montana-based firm dedicated to the success of families, businesses, and legacies. With more than 100 years of combined experience, we provide expert counsel in estate, family and business law.

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