At death, assuming no mis-dealings to certain innocent purchasers, the property involved in a life estate falls into the ownership of the remainderman (pl.
There is a small market for reversions in real estate, which necessitates a buyer to carry out enhanced documentary due diligence and physical checks.
If a life tenant purports to transfer the underlying 'reversionary' interest, which a life tenant never has, this constitutes an actionable breach of trust for damages and may constitute criminal fraud however may not entitle the ultimate reversioner (or substituted beneficiaries) to be able to obtain a court declaration that the property is their own if that property is in the hands of an innocent purchaser for value without notice (bona fide purchaser).
In short, as the life tenant's ownership is temporary, failing to maintain or reasonably protect the asset resulting in its diminution in value, or indeed, destruction constitutes a cause of action for the reversioner.
Selling property while keeping a life estate is commonly known in France as "viager"[2] where it is used more often than elsewhere, most famously in the case of Jeanne Calment, the longest lived human ever recorded.
A life estate can avoid probate and ensure that an intended heir will receive title to real property.
A disadvantage is the small risk of a fraud on the part of beneficiary Bill, if he could easily show in a particular jurisdiction an unfettered fee simple, he could sell the estate prematurely to an innocent purchaser such as when Al is on vacation.
Louisiana, applying civil law, has a similar default provision in intestate successions called a usufruct, which is only over community property and ends with the earlier of death or remarriage.
Some American states allow for an enhanced life estate deed, in which the grantor retains the ability to transfer to property to a third party without the consent of the remainderman.
The intestacy laws of England and Wales from 1 October 2014 provide for £250,000 (or the whole non-joint estate if less) and 50% of any excess to the spouse, remainder to adult children.
The arrangement in the first paragraph would in the UK be interpreted as an interest in possession trust and is usually avoided as for inheritance tax is considered 'reservation of benefit' requiring fully backdated sums of annual income tax on whatever market rent ought to have been paid to the legal owner, in England and Wales for continued enjoyment of the asset.
These factors are prepared taking into account life expectancies and prevailing interest rates for a specific jurisdiction or purpose.
Accordingly, due to their potential versatility and complexity in the U.S., common law seldom recognizes a life estate in personal property (tangible items and livestock other than land including buildings) but such interests are recognized at equity where of adequate form — statutes and regulations impose formalities on the creation of lifetime interests in personalty.
If the proprietor has died, executors of the will, administrators or beneficiaries all have the right to apply for the standard form A restriction and are encouraged by the official guidance to do so.
This type of investment is being offered as an alternative to traditional buy to let and is becoming increasingly popular in the United Kingdom with over £30 million worth of Life Tenancies being delivered in 2018.