My grandmother deeded her house to my mother over 10 years ago with a "life estate" in the property. Until recently she was living in the home. She has suffered several strokes and now unable to live in her own home. She's in a nursing home. Can my mother sell the property? What portion of profits if any go to my grandmother?
Great question. Let's define what a life estate is for other visitors then give you a few thoughts and suggestions. This background is necessary for your figuring out your answer. A life estate is the right given to someone to live in a property, typically a house. It is common to use when you want to assure one person the use of the property, but assure that the property passes to other designated persons following that use. A life estate can be created in a host of ways. Deed is the most common, but it can also be done under a will. Many people use trusts instead. In your situation it sounds like the life estate was created by a deed (specifically from your grandmother to your mother). So the starting point in your analysis is to have a real estate in the state where the property is located review the deed to determine if the deed has any provisions governing when the life estate ends. Some life estate provisions are quite comprehensive (often those in a will), but those in a deed are usually quite limited and simple. If the deed is silent (which is likely the case) then you would need a local real estate attorney, or perhaps an estate attorney, to research the law in the state where the house is located to determine if state law provides for a termination of the life estate for any condition other than the death of the life tenant. It is likely that it may not (but your lawyer will have to research that issue, not only in state statutes, but in court cases in your state addressing life estate issues). If the deed is silent your mother may need to get a court order to sell the property if her mother, your grandmother, is still alive. The court might order that the funds be retained and invested and that the income be used by your grandmother, or to pay her costs. This use of income might be viewed as the equivalent of the the use of the house (analogous concepts exist in estate planning concepts such as qualified personal residence trusts). While federal estate tax concepts are unrelated to state real estate law concepts, the analogy might be useful to your attorney. You might also be able to get some input from a title company as well. They may not be willing to insure a buyer's purchase of a house subject to a life estate unless there is a death certificate showing the termination of that life estate, or another condition which terminates the life estate your grandmother has, which can be proven to them. Often the general counsel for a title company sees more of these types of issues than most real estate attorneys and may have some insight. Depending on the customs in your state, your real estate attorney may have to reach out to the title company general counsel, not you.
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