Legal Tip of the Week: The Quiet Estate Planning Power Move

A life tenancy, often referred to as a life estate, can be one of the most effective—and most misunderstood—tools in estate planning and real estate law. When used correctly, it allows families to plan ahead, maintain control, and reduce the risk of future tax exposure or disputes.

At its core, a life estate splits ownership into two parts:

• The life tenant, who has the right to use, occupy, and enjoy the property during their lifetime; and

• The remainder interest, which passes automatically to the new owner (often children or other heirs) upon the life tenant’s death.

  
  

How Life Estates Are Commonly Used

One of the most common scenarios we see involves intergenerational property transfers. Parents may want to pass property to their children but are not ready—or willing—to give up possession or control during their lifetime.

A properly drafted life estate can allow parents to:

• Continue living in the home for life

• Maintain use of the property (including collecting rents, if applicable)

• Clearly define who receives the property upon death—without probate

In many cases, this structure can also help limit future federal estate tax exposure, particularly when the property has appreciated significantly over time. While estate tax laws are complex and subject to change, planning ahead can make a meaningful difference for the next generation.

Why Life Estates Can Be Powerful

Life estates are well-recognized and commonly used in many jurisdictions across the United States. When done correctly, they can:

• Provide certainty of ownership

• Reduce the likelihood of family disputes

• Avoid probate for the transferred property

• Preserve family land or homesteads across generations

Because the remainder interest vests automatically upon death, the property typically passes outside of the probate process—saving time, expense, and frustration for heirs.

Important Limitations and Risks to Understand

Life estates are not one-size-fits-all, and they are not without risks.

Some important considerations include:

• Selling or refinancing the property later may require consent from both the life tenant and remainder owners

• Medicaid planning and creditor issues can be affected by how and when the life estate is created

• Once granted, a life estate can be difficult to unwind without cooperation from all parties

• Improper drafting can create unintended tax consequences or ownership disputes

Because of these risks, life estates should never be created using generic forms or “do-it-yourself” deeds pulled from the internet.

When a Life Estate Makes Sense—and When It Doesn’t

A life estate can be a great tool in the right circumstances, particularly for:

• Family homes

• Long-held family property

• Clear parent-to-child transfers

• Situations where long-term control and certainty matter

However, in other situations, different planning tools—such as trusts or alternative ownership structures—may provide better protection and flexibility.

The Bottom Line

Life estates can be an incredibly effective planning tool, but only when they are tailored to the family’s goals, assets, and long-term plans. Used improperly, they can create more problems than they solve.

If you are considering selling property, transferring property to family members, or planning for the future of family land, it’s worth understanding all available options!

Disclaimer: This blog is provided for general informational purposes only and does not constitute legal or tax advice. Estate planning and real estate matters are highly fact-specific, and laws may change over time. Reading this article does not create an attorney–client relationship. You should consult with a qualified attorney before taking any action based on the information discussed above.