Ownership of the property transfers automatically upon the life tenant’s death. The real property will automatically transfer to the remainderman without the ability to change the remainderman or protect the remainderman from creditors.

Can a remainder be mortgaged?

A remainderman has an interest in assuring that the life tenant does not destroy, damage, or otherwise diminish the value of the property. Without the consent of the remainderman, the life tenant may not take out a new mortgage or otherwise encumber the property.

What is a fee simple remainder?

Estate in remainder A form of estate in fee simple whereby the proprietor takes possession only on the termination of a life estate.

What is a remainder interest?

A remainder is a future interest in land. It is the right to own and possess the land after the fixed interest of current holder expires. Thus, a remainder can follow a life estate or a term of years. A person who has a remainder is called a remainderman.

What is the difference between a remainder interest and a reversion?

The key difference between a reversion and a remainder is that a reversion is held by the grantor of the original conveyance, whereas “remainder” is used to refer to an interest that would be a reversion, but is instead transferred to someone other than the grantor.

What does reversion mean?

intransitive verb. 1 : to come or go back (as to a former condition, period, or subject) 2 : to return to the proprietor or his or her heirs at the end of a reversion. 3 : to return to an ancestral type.

Can a remainder follow a fee simple?

Examples. B’s estate is not a remainder since a remainder cannot follow an estate held in fee simple absolute.

What is remainder interest?

The real property will automatically transfer to the remainderman without the ability to change the remainderman or protect the remainderman from creditors.

When does a remainder interest on a home end?

If the taxpayer is married, the life estate can be structured to last until the second spouse’s death. A remainder interest gives the holder the right to take ownership when the life estate has ended. The home will need to be appraised at the time of the gift to determine the value of both the life estate and the remainder interest.

Can a remainder interest be gift to a spouse?

Gifting a remainder interest requires the property ownership to be divided into two separate interests: a life estate and a remainder interest. A life estate gives the holder the power to retain ownership until death. If the taxpayer is married, the life estate can be structured to last until the second spouse’s death.

Can a remainder interest be gifted to a charity?

The gifting of a remainder interest is not recommended on debt-encumbered property because it could result in undesirable tax consequences to both the donor and the charity.

Why do you need a life estate / remainder arrangement?

One primary reason is to allow one person (or persons) to have the use of property during life and then have someone else own the property after the life estate expires. Life estate/remainder arrangements are also used for estate tax planning purposes.