Life Estates

A testator may gift an interest in property, including real estate, in various ways. Apart from an absolute gift, the testator may give a life estate or a personal licence allowing the beneficiary merely to reside in the property.

A life estate is a proprietary right. As such, generally it may be transferred, leased, or mortgaged. It is a right capable of sustaining a caveat. It often has significant value. The words that most commonly signify a life estate are ‘occupy’ and ‘use’, either separately or together. The word ‘occupy’ does not always signify a life estate, the context in the whole of the testator’s will needs to be considered. However, where the beneficiary getting the benefit of the property during their lifetime has the liability of paying certain expenses such as rates, insurance and repairs, usually borne by the ultimate beneficiary (called ‘remainderman), it will generally signify the testator’s intention to create a life estate.

A ‘portable’ life estate allows the beneficiary to change the property to which the right attaches when the needs of the beneficiary change e.g. from a large house to a unit or retirement villa.

A lesser right than a life estate is a right of residence. This is a mere licence and does not create a proprietary estate. It cannot be sold, leased, or mortgaged. The use of certain words often distinguishes a life estate from a right of residence. ‘Reside’ and ‘remain’ often signify a right to reside only. Again, you need to look at the context in the will to determine whether a life estate or mere right to reside has been created.

When creating a life estate, especially a portable life estate or right of residence the testator needs to keep in mind that the benefit to the ultimate beneficiary or remainderman can be postponed for many years.

For further advice and information please contact your solicitor.

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