This is referred to a “LIFE ESTATE.” There are two types of life estates.
1. An Estate in Reversion. Title reverts back to the original individual when current owner dies. John deeds property to Mary while she is alive. Mary dies, ownership reverts back to John. This could also involve three or more individuals. Everything is based on Isabel. John deeds property to Mary until Isabel dies. Mary is the current owner with a clause in the deed that says when Isabel dies, the property ownership goes back (reverts)to John and at that point Mary no longer owns property.
2. An Estate in Remainder. Title goes onto a third individual when the person that the life estate is based upon dies. John deeds to Mary. When Mary dies ownership goes onto Ralph. Ralph receives full ownership of the property. Because of the future change of title the holder of the estate (when someone dies) the erstate is prohibited from willing the property to anyone. The holderof the estate, Mary in our examples can do everything else an owner is allowed to do except will it. She can sell it, but when the chosen individual in the original transfer to Mary dies, the life estate ownership changes and Mary’s buyer is left with nothing. This doesn’t happen very often as it is usually only used for family tax planning. Mary has to pay the property and any other taxes on the property while she is owner. Mary can get a loan against the property although most lenders won’t give a loan because of the unknown length of her ownership. Mary can rent it out to a tenant. But, all leases are automatically canceled when ownership changes. Everything changes when the party who is designated dies due to the reversion or remainder clause in a life estate.
