Home Sale Proceeds Go To Life Estate Owner

Added April 16, 2009 by Ilyce R. Glink and Samuel J. Tamkin

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Summary: As you get older you may decide to put your assets in a life estate, in order to protect them and to make ends meet. When an asset that's part of the life estate gets sold, the life estate owner receives the proceeds, but the sale is only valid while the life estate owner is alive. After the life estate owner's death, the assets get transferred to the remaindermen (or beneficiaries) of the life estate.

Q: My mom is 92 years old, very competent and is in an assisted living facility. She has a life estate. My sister and I are the remaindermen. My mom wants to sell her home to a grandson. When this house is sold who is entitled to the money from the sale?

A: If your mother sells her interest in the home, she can only sell what she has. She has a life estate in the home. She no longer is the owner of the underlying property. She would be entitled to get and keep the money from the sale of her life estate. Her grandson would be entitled to use the property while she is alive.

At your mother’s death, the grandson’s interest in the home would end and you and your sister would then own the home.

A life estate is an interest in a property for the life of the person that receives it. The life estate does not transfer to another person. If your mother sells her life estate, the grandson would not get to keep the property for his life but for the rest of your mother’s life.

As people age, the value of a life estate becomes less and less. If you had someone offer you the balance of a 30-year lease on an ocean front home, you would certainly pay more if there were 29 years left on the lease rather than only one year.

While we hope your mother has many years to live, it is unlikely that buying a life estate would be a good move for her grandson. It would be easier if the grandson simply rented the property, or looked for a different home to buy.

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