When a property owner wants to transfer real estate but still retain the right to live in or use it for the rest of their life, they may create a life estate.
This estate planning tool splits ownership into two separate interests: one for the present and one for the future.
But that often raises the question: who really owns the property when there’s a life estate?
Let’s break it down in plain English and see how this concept works in California.
Quick Answer
- The life tenant and the remainderman both own the property in a life estate.
- The life tenant owns the present possessory interest, which is the right to use, occupy, and control the property during their lifetime. The remainderman owns the future interest, which is automatic full ownership that activates upon the life tenant’s death.
- Major decisions like selling or refinancing require both parties’ consent because both hold legally enforceable ownership interests.
1. What Is a Life Estate? A Quick Look at the Basics
A life estate is a property ownership arrangement where one person (the life tenant) has the right to use and occupy real property for their lifetime.
On the other hand, the second party (the remainderman) automatically inherits full ownership when the life tenant dies.
According to California DHCS guidance, this creates two simultaneous ownership interests in the same property.
| Party | Role | Rights Activate |
| Grantor | The original property owner who creates the life estate | At deed recording |
| Life Tenant | Person with lifetime use rights (often the grantor themselves) | Immediately upon recording |
| Remainderman | A person who inherits property automatically | Upon the life tenant’s death |
| Important point: California law also requires life estates to be created through a written, recorded deed. Oral agreements are unenforceable under the California Statute of Frauds. The deed must clearly identify the life tenant, the remainderman, and the property’s legal description. |
2. How Do You Create a Life Estate? A Simple 7-Step Guide
You create a life estate by drafting a written deed that identifies the life tenant and remainderman, having it notarized, and recording it with your county recorder’s office.
Life estates in California can be established in several ways:
- By Deed: The property owner records a deed reserving a life estate and naming the future owner (e.g., “to Jane for life, then to Raj”).
- By Will: A will may grant a surviving spouse or loved one a life estate in a residence, with remainder to children.
- Through a Trust: Often, trusts include life estate provisions allowing a surviving spouse to use trust property for life before passing it to beneficiaries.
| If you are planning to go with a will or trust, you need to go with an attorney who has qualified skills. Avoid making rushed decisions, as they may hurt in the future due to some negligence. |
Steps to Create a Life Estate by Deed
The most common method to create a life estate by deed – the steps are covered below in detail:
Step 1: Verify Property Eligibility
Confirm a clear title via the current deed and resolve liens or debts. Contact lenders, as “due on transfer” clauses in mortgages may trigger full repayment upon creation, per loan agreements.
Step 2: Consult an Attorney
A California-licensed attorney drafts the deed to comply with recording statutes, avoiding errors in DIY forms that can invalidate transfers under state law. They align the life estate with your will, trust, and Medi-Cal planning to prevent conflicts.
Step 3: Draft the Deed
Include the exact legal property description (lot, tract, county, metes and bounds) from the current deed, “reserves a life estate” language, and the assessor’s parcel number (APN) per California Revenue and Taxation Code §11911.1 for clarity.
Step 4: Notarize Signatures
All parties sign before a notary with a valid ID, per California Government Code §27287. A power of attorney allows agents to sign if a party is unavailable due to disability.
Step 5: Record with County
File the notarized deed with the county recorder where the property is located, using 8.5″ x 11″ paper with required margins and a return address, per Civil Code §1169. Fees range from $50-$100, plus $0.55 per $500 transfer tax if applicable.
| Pro Tip: Include a “Recording Requested By” section with your return mailing address. This is mandatory by law. |
Step 6: Pay Recording Fees
Base recording fees vary by county but typically range from $50 to $100 for the first page plus additional fees per extra page. Documentary transfer tax applies at $0.55 per $500 of property value if the transfer exceeds $100 in consideration.
Step 7: Update Related Documents
Notify your insurance carrier of the remainderman’s interest to avoid claim issues. Revise wills or trusts, as life estates pass outside probate and cannot fund trusts without dissolution.
3. What are the Rights and Responsibilities of Each Party in a Life Estate Plan?
The life tenant manages current use and income but must preserve value, while the remainderman safeguards future interest without interfering, enforcing limits through California law to balance rights.
Rights of Each Party
The following table outlines the distinct rights of the life tenant and remainderman in a California life estate:
| Right or Obligation | Life Tenant | Remainderman |
| Possession and use | Has the full right to live in or rent out the property during life | No right to occupy while the life tenant is alive |
| Income and profits | May collect rents or income generated | None until the life tenant’s death |
| Maintenance and taxes | Responsible for taxes, insurance, and upkeep | Entitled to receive the property in reasonable condition |
| Sale or mortgage | Generally, cannot sell or refinance without the remainderman’s consent | Holds future ownership but limited current rights |
| Ownership after death | Ends at the life tenant’s death | Becomes a full owner automatically |
Responsibilities of Each Party
In a California life estate, responsibilities are split between the life tenant and the remainderman to preserve property value, per Civil Code §840. Life tenant handles active duties; remainderman has minimal obligations to ensure intact transfer.
| Responsibility | Life Tenant | Remainderman |
| Property Taxes | Pays all taxes to avoid liens, per Civil Code §840. | No contribution required. |
| Insurance | Maintains homeowner’s insurance to protect property. | No insurance funding duty. |
| Maintenance | Covers repair costs, prevents deterioration (“waste”). | Receives property in good condition, no upkeep costs. |
| Preventing Waste | Avoids actions that reduce value, faces lawsuits if neglectful. | Can inspect, sue for waste if value drops. |
| Expenses | Funds all taxes, insurance, and repairs for property upkeep. | No financial duties during the life tenant’s life. |
What Is “Waste” in Life Estate and Why It Matters
Waste occurs when a life tenant’s actions or neglect substantially decrease the property’s market value. California courts define waste as failing to act like an “ordinarily prudent person” in preserving their own property.
Common Examples of Waste:
- Unpaid property taxes leading to liens or foreclosure
- Structural damage from deferred maintenance (leaking roof, foundation cracks)
- Removing valuable fixtures or landscaping
- Allowing property to become uninhabitable
- Environmental contamination or code violations
4. What are the Benefits of Creating a Life Estate?
Life estates can serve several estate planning goals:
1. Skip the Probate Hassle
A life estate lets your property go straight to your chosen heir (the remainderman) without probate court. That saves you from hefty fees.
| Pro Help: As per California Law, a life estate can help you avoid probate, which can cost you up to 4% of the property value. |
2. Protect Your Home from Medi-Cal Claims
If you’re planning for long-term care, a life estate can shield your home from Medi-Cal’s Estate Recovery Program (MERP).
| Tip: Transfer property into a life estate at least 30 months before applying for Medi-Cal nursing home benefits. MERP only recovers from probate estates. Since life estate property transfers outside probate, it avoids recovery if properly structured. |
3. Save on Taxes
When the life tenant passes, the remainderman gets a “stepped-up basis” under IRS code §1014, meaning no capital gains tax on the home’s value increase over time. Plus, creating a life estate doesn’t trigger gift tax since you keep control.
4. Keep Your Family Home Secure
As the life tenant, you’re guaranteed to stay in your home for life. The remainderman’s creditors can’t touch it while you’re living there.
Got a blended family? A life estate locks in your kids’ inheritance, even if you remarry, and changes need the remainderman’s okay, keeping things fair and secure.
Protect your family’s educational future through college planning. Prepare all the future documents today to get peace of mind.
5. How does Proposition 19 Impact Life Estate?
Proposition 19 changed California property tax rules for inherited homes, including those held in life estates.
When the life tenant dies and the property transfers to the remainderman, Proposition 19’s reassessment rules apply unless the remainderman uses the home as their primary residence within one year.
The exclusion caps at $1,044,586 above the property’s factored base year value for transfers between February 16, 2025, and February 15, 2027.
6. Potential Drawbacks and Legal Considerations
Life estates restrict financial flexibility because selling or refinancing requires both parties’ consent.
They create irrevocable ownership transfers that cannot be easily changed without the remainderman’s agreement. Here are some points when you shouldn’t go with a life estate:
a. Limited Flexibility
Once created, both the life tenant and remainderman generally must consent to sell, refinance, or change ownership. This can create complications if family circumstances change.
| Important Point: Most reverse mortgage lenders refuse to issue loans on life estate properties because the life tenant doesn’t hold full title. This eliminates a common option for seniors needing to access home equity. |
b. Property Taxes and Reassessment
Under Proposition 13, transferring a remainder interest can trigger a property tax reassessment unless an exclusion applies (e.g., parent-child exclusion). Careful planning is needed to avoid unintended increases.
c. Capital Gains and Basis Issues
The remainderman may receive a step-up in basis only upon the life tenant’s death. If structured incorrectly, there may be adverse tax consequences when selling the property.
d. Maintenance Obligations
The life tenant must maintain the property, pay taxes, and keep it insured. Failure to do so can give the remainderman grounds for legal action.
e. Medi-Cal Recovery Risks
While life estates are sometimes used for Medi-Cal planning, they must be handled carefully to avoid disqualification or recovery exposure.
| MERP Claims Still Possible: While properly timed life estates avoid Medi-Cal Estate Recovery Program claims, mistakes in timing or documentation can leave the property vulnerable to recovery after death. |
7. Can a Remainderman Force the Sale of Property?
A remainderman generally cannot force a property sale while the life tenant lives because present possessory rights take priority.
California Code of Civil Procedure requires courts to approve a partition only if it serves all parties’ best interests. After the life tenant dies, multiple remaindermen gain absolute partition rights and can force a sale through the California Superior Court, with proceedings typically lasting 6-18 months.
8. What Are Better Alternatives to Life Estates?
Better alternatives to life estates offer more flexibility, probate avoidance, and control over assets in California. These include revocable living trusts, transfer on death deeds, joint tenancy with right of survivorship, and enhanced life estate deeds..
a. Revocable Living Trust
A revocable living trust holds your assets during life, transfers them on death without probate, and remains changeable. You act as trustee, managing everything freely.
This avoids California’s lengthy probate process, saving time and costs for heirs. It also handles incapacity through successor trustees.
b. Transfer on Death (TOD) Deed
A TOD deed names beneficiaries who inherit real property automatically upon your death, bypassing probate. It remains revocable until then.
In California, record it within 60 days of signing for validity. It applies to homes with up to four units or small farms.
c. Joint Tenancy with Right of Survivorship
Joint tenancy grants equal ownership to multiple parties, with automatic transfer to survivors on death. No probate needed for the asset.
California requires unity of time, title, interest, and possession. The deed must specify joint tenancy explicitly.
d. Enhanced Life Estate Deed (Lady Bird Deed)
An enhanced life estate deed, or Lady Bird Deed, reserves full control to sell or revoke while naming death beneficiaries. California’s version is the revocable TOD deed.
It enhances standard life estates by avoiding beneficiary approval for changes. Effective for probate avoidance in qualifying properties.
Life Estate vs. Living Trust in California
While life estates can serve as a simple transfer method, most Californians benefit from using a living trust instead.
A revocable living trust provides:
- Greater flexibility to amend or revoke terms
- Control over what happens if you become incapacitated
- Ability to distribute property to multiple beneficiaries
- Stronger protection against disputes or confusion
Life estates, on the other hand, are irrevocable once executed. This makes them less ideal for individuals who anticipate future changes.
How Can an Estate Planning Attorney Help with Life Estates?
An attorney drafts your life estate deeds. They follow all laws. They tailor plans to guard your assets and stop family arguments.
At the Law Office of Ishajeet K. Singh, APC, we help families across California structure their estate plans to avoid probate, minimize taxes, and protect loved ones.
If you’re considering creating or modifying a life estate, schedule a free 30-minute peace-of-mind consultation to explore your best options.
What happens if the remainderman dies before the life tenant?
The remainderman’s heirs inherit the future interest. If the remainderman left a will, their designated beneficiaries receive the property rights. If not, California intestacy laws determine who inherits.
Does a life estate protect property from Medi-Cal recovery?
It depends on timing. If created before the 30-month look-back period, a life estate can protect the home from Medi-Cal Estate Recovery Program (MERP) claims. Consult an elder law attorney for proper planning.
What are the tax implications for life estates in California?
The remainderman receives a stepped-up basis at the life tenant’s death, reducing capital gains taxes. The life tenant keeps Prop 13 property tax protection. However, Prop 19 may cause reassessment if the remainderman doesn’t meet the exceptions.
How is a life estate different from a living trust?
A living trust gives you complete control to modify or revoke. A life estate cannot be easily changed without the remainderman’s consent. Trusts offer more flexibility but cost more to establish.
Conclusion
In summary, life estates divide property ownership. The granter or life tenants use it now, and the remaindermen own it later.
Benefits of a life estate include probate skip and tax perks. But the potential drawbacks are also quirky, as they can lead to limited sales and changes in the property.
Before getting any life estate program, always consult your lawyer. Keep in mind that this blog is a general guide and is not an alternative to a lawyer’s advice. Read our disclaimer to learn more.
