A life estate allows two or more people to jointly own real estate property. One person, termed the life tenant, has the current right to use the property for a period of time bounded by their life span. A second person has the remainder interest, which is a future interest.
This person is termed the remainderman or the remainder beneficiary, but their ownership interest is limited until the death of the life tenant. Texas law sets out rules for making a life estate. It also provides a means of terminating a Texas life estate if the owner of the estate commits waste.
Texas Life Estate as Property Interest
A life estate in real property law is not simply a right to occupy. It is a property interest that lasts as long as the person lives. While a life estate owner does not have ownership of the property, they do have the right to live on the property or rent it out. They can even sell the life estate to another person if they get the consent of the remainderman. But whatever arrangement the life tenant chooses ends at the death of the person holding the life estate.
The person granted a life estate in Texas has no obligation to live on the property. "Abandonment" of a life estate means something other than simply moving away from the residence.
In order to take away the rights of a person holding a life estate, a judge must find that they have committed or are committing waste or damaging the property in a way that could impact the value of the property for the remainderman.
Creating a Life Estate in Texas
Texas law imposes several requirements for creating a life estate. A life estate can be created through different legal documents including a deed, a will or a trust. Generally, creating a life estate is part of a grantor’s estate planning.
Though no particular language is mandated to create a life estate, the person doing so must be very clear about their intent. Common phrases describing the creation of a life estate include “for life” or “until his/her death.”
In addition, the document that creates the life estate must name at least two persons: the one who will hold a life interest in the property, sometimes called the life tenant, and the person who gets title when the life tenant dies, termed the remainderman in Texas. Note that there can be multiple life tenants and/or multiple remaindermen.
Grantor Can Be Life Tenant or Remainderman
The grantor can make themselves the life tenant or they can write themselves into the document as the remainderman. For example, if Joe Jones wants to give his mother the legal right to live in a house for her lifetime, and have the property revert to Jones when his mother dies. In that case Jones is both the grantor and the remainderman.
On the other hand, Jones may wish to live in the property himself during his lifetime and, on his death, transfer the ownership interest to his child. In that case, Jones is both the grantor and the life tenant, and the child is the remainderman.
Rights and Duties of Life Tenant in Texas
Life tenants in Texas are joint property owners. As such, they have rights in the property and also certain duties to care for the property for the remainderman. The primary right of a Texas life tenant is the right to exclusive possession.
That is, no one else has the right to live on the property while the life tenant is alive without their permission, and that includes the grantor and the remainderman.
Life Tenant Can Rent Out Property
While the life tenant has the right to occupy the property, they are not obligated to do so. They can rent out the real estate and are entitled to all income they raise from rentals or profits. They can sell, lease or mortgage the property, with the consent of the remainderman. But the only interest sold, leased or encumbered would be their lifetime interest. They also have some rights under the Texas homestead law.
Upkeep of the Property
A life tenant has specific duties they must undertake. During the term of the life tenancy, the life tenant is responsible for paying utilities, property taxes, insurance and interest on the mortgage.
Texas law also mandates that they keep the property in good condition, maintained and repaired during their lifetime and comply with all local zoning ordinances and building codes. They are not permitted to use the property in a way that causes unnecessary damage or depreciation.
Rights and Duties of Remainderman in Texas
Like the life tenant, the remainderman also has rights in the property, as well as obligatory duties. During the lifetime of the life tenant, the remainderman must pay the principal of the mortgage each month. After the life tenant's death, the remainderman must pay all property taxes, mortgage interest and insurance premiums.
A remainderman has the right to sell their property interest once the life tenant dies. They can sell before the life tenant dies, but only with the consent of the life tenant.
The remainder interest also has the right to take the life tenant to court if they act in a way that reduces the property’s value or fail to take action required to maintain the property. It is usually best to obtain legal advice for this type of lawsuit.
Disadvantages of a Texas Life Estate
While there are benefits to a life estate arrangement, it is important to recognize the cons. For example, parents sometimes create a life estate arrangement where they deed themselves a life estate in their home, naming their adult children as the remaindermen. They may not realize that this is irrevocable.
Even if they later change their minds, they cannot undo the transfer. This can cause family disputes if the children have different views from their parents on required maintenance of the property; they may even end up in court.
This is why it is important to talk to an experienced attorney from a well-reputed law firm before deciding on this particular arrangement. There are many other ways of leaving property to children that may work better in a particular case.
Teo Spengler earned a JD from U.C. Berkeley Law School. As an Assistant Attorney General in Juneau, she practiced before the Alaska Supreme Court and the U.S. Supreme Court before opening a plaintiff's personal injury practice in San Francisco. She holds both an MA and an MFA in English/writing and enjoys writing legal blogs and articles. Her work has appeared in numerous online publications including USA Today, Legal Zoom, eHow Business, Livestrong, SF Gate, Go Banking Rates, Arizona Central, Houston Chronicle, Navy Federal Credit Union, Pearson, Quicken.com, TurboTax.com, and numerous attorney websites. Spengler splits her time between the French Basque Country and Northern California.