under a will with the idea that a younger person will then take the property upon the death of the one who receives the life estate. Title may also return to the person giving or deeding the property or to his/her surviving children or descendants upon the death of the life tenant—this is called “reversion.” Examples of creation of a life estate include, “I grant to Sally Smith the right to live in said real property until her death,” or, “I give my daughter, Sadie Smith, said real property, subject to a life estate to Sally Smith.” This means a woman’s mother, Sally, gets to live in the house until she dies, and then the woman’s daughter, Sadie, will own the property. Creating a life estate is done by redrafting the property’s deed to include mention of the life estate with the remainder passing to somebody else. Like any other property transfers, both parties must sign this deed, have it notarized, and then submit it to the recording office of the state. Such a document should be prepared by a competent real estate attorney. Living trusts have come to replace the role played by life estates, which are not as commonly used today. However, there are some advantages to this form of inheritance. For example, this method is useful to the heirs as a means to increase the property’s value following the death of the decedent. A life estate can also help avoid probate, which is a legally required process to transfer the property from the deceased to his descendants, but which can be sidestepped by using a life estate instead, since it is not technically an inheritance. A life estate can also be called an “instant transfer.” There are, of course, tax implications when using a life estate. Section 2036 of the Federal Estate Tax Code treats life estates as a gift. The gift tax must only be paid if the value exceeds a specified amount. If the property is sold after the end of a life estate, there is no net gain that needs to be reported on taxes because of the
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