How to manage a life estate: This older form of transferring an estate can cause a lot of confusion. Here’s what you need to know about your obligations.

Q: My dad quit claimed his house to me but if he wants, he can live there his entire natural life. Does that mean I own the house now or when he his dead? Does he have to have to put up an escrow to fund the maintenance of the house as long as he is living there?

A: You’re describing a life estate. We’re not fond of life estates and the complications that come about from granting or retaining a life estate. It’s clear from your letter that your dad conveyed to you his property but retained a life estate. This means that while you technically own the home, your dad gets to use the property until he dies.

The life estate can take different forms. Your father could have retained the life estate and also agreed to pay the real estate taxes on the home along with all the other expenses that go along with owning the home. On the other hand, he also could have given you the home, retained the life estate but made you responsible for the expenses on the home. We don’t know how you and your father worked out the deed and life estate arrangement.

We’d like to believe that your father wanted to live in his home and continue to make the same payments that he had been making before he quitclaimed the home to you. The deed would convey ownership of the home to you, but in that same document, your dad would have put a clause in there indicating that he was retaining the right to use the home for as long as he lives.

That life estate clause can be as simple as a sentence or can be several paragraphs long to indicate how the life estate would work: what responsibilities the parties would have and who would pay for what when it came to the maintenance and upkeep of the home.

Life estates are quite rare. Most people keep properties in their own names or in the name of a trust they control rather than quit claiming the property to someone else but retaining the life estate. When a property is owned by you and controlled by you, you can mortgage it, make improvements to it and treat it like your own because the property is your own.

When it comes to estate planning purposes, we prefer that our readers use a living trust or other document that keeps the property in the name of the parent until the parent dies. At that time, the document created would convey title to the child and it would be at the time of the parent’s death that the child would get his or her ownership of the home. Transferring ownership at death would help the most heirs avoid any sort of tax when they go to sell the property.

Often, when attorneys hear the term “life estate,” they recall their days in law school. There are old rules governing life estates and some of those rules would probably require your father to maintain the property, pay the expenses of the property and pay the property taxes on the home.

While the life estate owner typically has these obligations, there may not be an obligation to set up an escrow to insure that there are monies available to pay for these expenses. However, if the life estate holder fails to care for the life estate and the property, the life estate holder might violate the terms of the life estate and may end up losing the property. If the life estate holder violates the terms of the life estate, the life estate might end and the property without the life estate would become entirely yours.

Having said all that, to get the answers to your specific questions, you’ll need to talk to an attorney who has experience with life estates to see what terms were included in the document that created the life estate and to understand what your dad’s financial (and other) obligations are under the life estate and what your obligations might be while your dad is alive.