By Harry S. Margolis
Owners of real estate sometimes transfer such property to their children while retaining the right to live in the property for the rest of their lives. Such ownership interests are referred to as “life estates” and give the life estate owners the exclusive right to occupy and even rent out the property during their lives. The children, in this case, are referred to as “remaindermen” and they have a real interest in the property, just no right of possession until the life estate owner dies.
All about life estates
This type of ownership avoids probate and is often used in MassHealth planning because it also avoids any claim the state may have for reimbursement of its cost of paying for the parents’ care in a nursing home. At the same time, the parents maintain control over the property during their lives. The only thing they cannot do is to sell the property without the consent of the remaindermen.
This is all described in more detail in the most popular post on this site, “What is a Life Estate and Why Would You Want One?“
Both the life estate and remainder holders can sell their interests, either the life estate or the remainder interest, but doing so does not affect the other interest. In other words, if the parents, in our example above, were to sell their life estate, the new owner’s interest would still end at the death of the second to die of the parents. And if the children were to sell their interests, the new owners would have to wait until such death before they could take possession.
But what about either the life estate holders or the remaindermen forcing a sale of the entire property?
Most property owners have a right to withdraw their equity from property in which they have an ownership through a legal action known as “partition.” So, if you and your siblings inherited a vacation property from your parents which you never use whether because you live in California and the house is in Middle-of-Nowhere, Maine, or you just can’t stand your brothers and sisters, if your siblings won’t buy out your interest, you can go to court and force the property’s sale. Upon its sale, you would each receive a share of the proceeds equal to your proportional ownership of the property itself.
But what if your interest is in the remainder? Can the children in the life estate example above bring a partition action to sell the property despite the fact that the parents hold a life interest? Fortunately for parents, the answer is “no.” This was clearly stated in the recent Massachusetts Land Court case of McCarthy v. Bragdon (MA Land Court Misc 20-000118, July 9, 2020), citing cases going back to 1986, 1918, and 1885:
The right to partition presupposes a present, possessory interest in land. Bernat v. Kivior, 22 Mass. App. Ct. 957 , 958 (1986); see Towle v. Wingate, 229 Mass. 556 , 557 (1918). As a result, “[t]he holder of a remainder interest only may not maintain partition proceedings.” Allen v. Libbey, 140 Mass. 82, 83 (1885). The right of a grantee of a life estate to occupy the premises defers the rights of the remaindermen to the premises and thus the remaindermen could not maintain a partition proceeding.
The case itself involved some unclear deeds and the daughter and her husband who were trying to force a sale argued that they also had a 50 percent life interest in the property as well as their 100 percent interest in the remainder. The Court disagreed with both their interpretation of the deeds and of their claim that owning the remainder interest alone was sufficient to force a partition sale.
This case should allow those parents holding life estates with their potentially wayward children owning remainder interests rest easier that they are secure in their homes.