Robbins: Understanding life estates |

Robbins: Understanding life estates

It’s sorta yours. But it’s sorta not.

It’s really something in between.

What we are talking about is a “life estate.” But before we get there, we have to understand both what constitutes an “estate” and what a life estate is not.

In short, an “estate” is property. One’s total estate is everything that’s owned. “Real” estate is land and what is growing on it, affixed to it, or permanently attached to it. A brick home on a parcel is part of the real estate. The Ford Fairlane parked in the garage, which is part of the “estate” is separate from the “real” estate. When one structures an estate plan it is to determine how to divvy up your stuff when you are gone … the “real” estate, if any, included.

You may be wondering, what exactly makes real estate real?  Isn’t the Ford Fairlane leaking oil on the concrete real as well?

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Real estate became a legal term to identify a royal grant of estate land. Yes, as you may be thinking, its origin was in Mother England. The term “real estate” was first recorded in the 1660s — long before we dreamed of Ford Fairlanes leaking oil. Its etymological origins are in early modern English.

The word “real” is derived from Latin, meaning existing, actual, or genuine. The word “estate” is an English adaptation of the old French word “estat,” meaning — as it is French and all — “status.” Putting it together, we have something approximating “genuine status” which was, and to a degree still is, what ownership in land confers.

Real estate is something tangible and provable. It is something, quite literally, that you can sink your heels into. When one owns real estate, one is said to be “seized” of it.

A “fee” interest, also called a “fee simple” interest, is an interest in land or other realty over which a person has absolute ownership. I own my home “in fee.” I  may put it to virtually any use I wish. I can sell it, give it away, rent it, lease it, mortgage it, or bequeath it. It is mine, all mine, unless I own it jointly with someone else, in which case, it is ours all ours together.

One may also have an interest in real property as a tenant or “leaseholder.” Formally, this type of possessory interest grants the holder of it use and occupation of the property for a particular duration. The lease can last for weeks, months, or years depending upon what the “fee holder” and the “leaseholder” agree between them.

A leasehold doesn’t grant actual title to the land. Therefore, the lease owner can’t dispose of it (that is, sell, encumber, gift, or otherwise transfer it). Rather than a deed or title, the lease owner will have a lease agreement that dictates the rights and obligations of both the lease owner and the property owner. When the lease is over, the property owner will regain all rights.

So, what then of a “life estate?” As noted above, it is somewhat of a tweener.

Although certainly not as common as either a fee estate or a leasehold interest, a life estate is yet another type of interest in land. What distinguishes it is that the interest expires upon the death of a specified person.

Let’s say, for example, that I grant my land as a life estate to … well, let’s imagine, you. This means that you can occupy, possess, and enjoy the property during your lifetime, just as if it were a fee simple interest. However … your ownership interest in the land will automatically cease upon your passing. Rather than passing to your heirs, the land and all interests in it come back to me. Or, if I’m no longer around, the land will pass to my heirs. What is key here is that you have no right to the land that extends beyond your lifetime. You cannot sell, transfer, gift or bequeath it.

You may be scratching your head in wonder: Why would anybody do this? There may be many reasons but a common one (to the extent that life estates are common) is that a life estate may be employed for estate planning purposes. Say you want to give your kid the right to be able to live on and enjoy your land after your death, however, after his/her death, you want your land to go to someone else. You give your kid the life estate and, when she’s gone, the land “reverts” to your estate, then off it goes to who will be the ultimate “fee” beneficiary.

If you’ve not seen or heard of life estates before, you’re likely not alone. I’ve been at this law stuff for 39 years this month and have only encountered them a handful of times. Though not as rare as Sasquatch sightings, they are nonetheless a bit of an exotic species. Still, from time to time, a well-placed life estate precisely fits the bill.

Rohn K. Robbins is an attorney licensed before the Bars of Colorado and California who practices Of Counsel in the Vail Valley with the Law Firm of Caplan & Earnest, LLC. His practice areas include business and commercial transactions; real estate and development; family law, custody, and divorce; and civil litigation. Robbins may be reached at 970-926-4461 or at His novels, “How to Raise a Shark (an apocryphal tale),” “The Stone Minder’s Daughter,” and “Why I Walk so Slow” are currently available at fine booksellers everywhere; coming soon, “He Said They Came From Mars.” 

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