Published on October 23, 2018
Written by Anndrea Brand
Complete ownership (known as fee simple) is probably what most people have in mind when they wonder who property belongs to, but it is far from the only possibility.
In this article, we’ll discuss a more limited form of ownership – the life estate – and explore how its existence affects fee simple ownership.
The fee owner is the person or persons that hold an interest – not to be confused with a security interest – in the subject property. When you own property in fee simple, it means you essentially have total, indefinite control of the property and can do nearly anything with it. There are a few lines you cannot cross, like creating a nuisance on your property, but as a fee owner you are mostly free to do as you wish.
However, many things can affect fee ownership, causing it to be limited or even come to an end. Some of them include, but are not limited to, divorce decrees, marriage certificates, death certificates, quit claim deeds, probate documents, eminent domain, and life estates.
Life Estates are very much a different ownership situation from a single fee owner. A life estate grants someone the right to use, occupy, and own property for so long as the person is alive. The person who possesses a life estate is called a life tenant.
Here is an example of how life estates work: imagine a widow who wants to deed her house to her son and his wife, but also wants to remain living in the house until her death. The widow can accomplish this by conveying the property to her son and daughter-in-law in fee simple, while carving out a life estate for herself. While her son and daughter-in-law are now fee owners, the widow retains the right to live in the home until her death. At the time of her death, the son files a certified death certificate in property records at the county; the life estate terminates and the property is then owned solely by the son and his wife.
Life estates also affect signors for any mortgage taken out on the subject property. In Minnesota, all fee owners and spouses need to sign a mortgage. In the case of life estates, the life estate holder and their spouse, if any, need to sign the mortgage. All parties that show up on the title work need to sign the mortgage along with their spouses.
If you have any questions about life estates and how they could affect the title process for the loan you’re working on, please send me an email.