A Breakdown of Life Estate

What Is a Life Estate and How Is It Set Up?

A life estate is the right to occupy or use a specified parcel of land for the period of a person’s life. There are a number of ways to set up a life estate. Most common are life estates that are set up by operation of law (under the Texas probate code) and life estate pursuant to a deed.

The most common life estates under the Texas probate code occur when a person dies without a will (called an intestate death.) In very specific circumstances, a surviving spouse may have a life estate in the deceased spouse’s homestead, with a remainder interest in the deceased’s children.

Otherwise, people may, as part of estate planning, or probate avoidance planning, set up life estates in land, and transfer them by use of a life estate deed. The deed can be a warranty deed, deed without warranty or a ladybird deed.

What Is a Ladybird Deed?

A ladybird deed is a type of life estate, with added features. In a normal life estate, the holder of the life estate interest may not sell, mortgage or encumber the property, absent permission from the remainderman. The life estate owner only has occupancy and use rights for the duration of the person’s life.

A ladybird deed (also called an enhanced life estate) allows the enhanced life estate owner to sell, mortgage or encumber the property. If the enhanced life estate owner sells the entire property, the remainderman’s interest is extinguished.