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What Is A Life Estate? | Real Estate Exam Prep - YouTube
Channel: The Real Estate Classroom
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you
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everybody my name is Paul vanessi and
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welcome to the real estate classroom
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YouTube channel this channel is simply a
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place where that if you're studying for
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the real estate licensing exam you can
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come here and watch videos and get the
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information that you need to help pass
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the licensing exam all right do me a
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favor before we get started if you would
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give this video a thumbs up hit that
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little red subscribe button and click
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that little notification bell now
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throughout this video if there is a
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question that you want to ask or maybe
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I'm not very clear on something and you
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need clarification down in the comment
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section below please post your question
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down there and I will get an answer to
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your question and real quickly I've
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already done a video that discussed life
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estates and I highly recommend that you
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go and watch that video first and up in
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the right-hand corner of this video
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there's gonna pop up a little I that's a
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link to that video that video is called
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freehold and non freehold Estates I
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highly suggest you go there watch that
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video and then come back here I'm doing
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this video separately because in that
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video I wanted to clarify a few things
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and add a few more details that I didn't
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in that video so I'm doing it in this
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one so a life estate a life estate is
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actually pretty common a life estate is
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a freehold estate meaning it is
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ownership a life estate is created by a
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deed meaning voluntary alienation so
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someone is going to voluntarily give
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somebody a life estate it can also be
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created by operation of law there are a
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few states where they have those
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mechanisms in place we're not going to
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discuss them in this video we're only
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going to be discussing a life estate
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that's created through a deed and there
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are some key terms that you have to know
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and they're right up here remainderman
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what does a remainderman we're going to
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discuss it in the video I'm also going
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to discuss what reversionary interest is
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in a life tenant who the life tenant is
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alright so life estate let's get to it a
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life estate here's how we create a life
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estate let's say that I own this house
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and my mom needs a place to live and I
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mom I'll tell you what I'm gonna give
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you this house I'm gonna transfer title
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and remember in real estate title means
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ownership I'm gonna transfer the
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ownership of this house to you but only
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for the remaining balance of your life
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once you die then the the ownership
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interest is gonna transfer to what we
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call the remaindermen now explain that
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in a minute
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so Bom says great we're gonna do this
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so I sign a deed over and again remember
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title transfers when a deed is executed
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by the grant tours and the grant tours
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are the owners of record or all the
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owners it is delivered to the grantee
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which is the buyer and the grantee
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accepts it so in this case I'm gonna
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sign the deed I'm gonna deliver it to my
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mom and my mom accepts it and I'm gonna
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give her a life estate so mom gets the
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property mom owns it it's free it's a
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freehold estate mom owns the property
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but only owns it for the rest of her
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life now once I transfer title to mom
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she is legally known now as the life
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tenant so what can mom do well mom can
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sell the property she can lease the
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property she can take a mortgage out on
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it the things that mom can't do she
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can't waste the property and that means
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you can't she can't burn it down or
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destroy it and she can't bequeath it
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meaning will it to any one of her heirs
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or anybody else the waste part of it you
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know when I owned the property before I
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transferred it to my mom I owned the
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property fee simple absolute and if you
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don't know what fee simple absolute is
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again go back to that video that I
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referenced at the beginning of this
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video where we discuss what fee simple
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absolute is but it basically means I
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have absolute ownership so I can do
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basically whatever I want so if I own I
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own this property fee simple absolute if
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I wanted to burn the house down because
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I wanted a vacant lot I could do that I
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could do that mom cannot mom owns the
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property but she only owns it she
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doesn't have absolute ownership she
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doesn't have fee simple absolute she
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only has a life estate so that
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restriction that's in there prevents her
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from wasting the property or bequeathing
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it to anybody such as her her heirs but
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she can sell it she can lease it and she
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can mortgage it and I've actually seen
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all three of these for example there was
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an instance where I knew somebody that
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had a live tenant or she was a life
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tenant and she took out a reverse
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mortgage but the mortgage company set it
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up where the the reverse mortgage was
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based on the value of the the house that
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she had the life tenancy end but once
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that person died there was enough assets
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in her in her ancillary estate to pay
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back the loan so it wasn't tied to the
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property meaning the the property didn't
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have to be sold for the light or for the
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for the loan to be paid off I've seen
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life tenants lease a property and I've
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also seen them sell it one time I seen
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that so how does that happen
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it's kind of interesting so mom sells
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the property to Sally now Sally owns it
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for the remaining amount of Mom's life
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now what happens when mom dies or what
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happens when Sally dies what happens
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well there's this thing called a
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remainder man and reversionary interest
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so this can be set up wanted to way so
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when I transferred title to mom I have
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to name a remainderman because we know
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mom's gonna die at some point the
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remainder bin is the person that's going
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to receive the title so it can come back
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to me if I wanted to up ownership
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interest can come back to me or I could
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say listen I want it to go to my son Tom
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after you die now tom would be called
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the remainderman or in the case where
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it's coming back to me I would be the
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remaindermen now understand at this
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point once I transferred title to mom we
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have basically two owners we have the
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current owner which is mom and then we
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have Tom or me depending on how it's set
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up as the future owner the point is
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there are two people with ownership
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interest
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the property mom currently has the
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current ownership but tom has the future
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ownership we call that a reversionary
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interest the reversionary interest is
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the future interest that the
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remainderman has in the ownership of the
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life estate so when mom dies the
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reversionary interest belongs to Tom
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who's the the remaindermen now if I'm
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gonna get the property back then I have
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the reversionary interest and I am the
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remainder in the point is whoever ends
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up with the property after mom dies is
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called the remainder Minh and that
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future interest we got a legally call it
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something it's called reversionary
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interest so let's go back to the the
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scenario where mom sold the property to
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celli what happens well if Sally dies
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then the property goes back to mom so
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mom actually has the reversionary
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interest here and she is the
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remaindermen and then when mom dies tom
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is the remaindermen and the reversionary
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interest belongs to Tom okay so mom
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sells the property to Sally and mom dies
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first mom is the first one to die well
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then
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Sally's Sol her legal interests her
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legal ownership on the property
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immediately transfers over to tom
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because tom is the remaindermen and tom
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has the reversionary interest
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that's why selling is pretty rare
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actually where the the life tenant where
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mom sells the property to somebody else
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so it's technically possible but from a
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practical point of view it's not very
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valid you don't see it a whole lot
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anyway that is a life estate if you have
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any questions remember comment down
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below type it in there and I'll make the
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clarification or answer the question if
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I missed anything let me know
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one last thing if you've already taken
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your real estate licensing exam and you
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do remember a question regarding a life
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estate please down in the comment
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section write it in there to let the
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rest
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the community that watches this channel
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know that'll be very helpful to all of
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us that's all I got for this video thank
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you very much until next time you
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haven't taken your exam yet best of luck
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