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Understanding “life interest”
Source : The Hindu Property Plus Published On : 2009-03-07 City : Chennai

A life interest is an interest in an immovable property. It is created for the lifetime of the person or persons concerned

In many documents, you may come across the term “Life Interest” or “Life Estate”. It may not be clear as to what is meant by this term.

The implications of a person having a life interest in a property may also not be clear. In the event that you are thinking of settling a property or creating a trust also, reserving a life interest may be a useful option. If you have an idea of what it is, it would be helpful in dealing with properties.

A life interest or a life estate is an interest in an immovable property. It is created for the lifetime of the person or persons concerned. The ultimate interest is always in favor of another person. The life interest or the life estate ends on the death of the person in whose favor it is created. At times, the persons who hold life interest are also called “Life Tenants”.

A life interest holder is entitled to certain benefits in the property. He or she can receive rent or other income derived from the use of the property.

The person concerned will have a right to reside in the property, if the nature of the property permits the same. However, there are certain limitations as well.

One is that as the term itself implies, a life interest holder does not have absolute interest or control over the property. He or she cannot deal with the property independently. A life interest cannot be sold or transferred as a further life interest in favor of any third party. The life interest holder cannot create a better interest in favor of any other person. Although the life interest holder can exercise various rights, there may not be an immediate commercial value attached to the life interest. A life interest holder cannot by himself or herself, undertake even development of properties, without the consent of the ultimate interest holder. A life interest holder cannot commit acts of waste and damage to their property, which an absolute owner is entitled to.

A life interest can be normally created by a Will or by deeds such as settlement, gift, formation of Trust, etc. There are many types of life interests. The owner can reserve a life interest for himself or herself. The owner can create a life interest in favor of a third party. The owner can create a life interest in favor of one or more persons including the owner himself or herself. A life interest can also be created for the life of the longest lives of several persons.

Good strategy

Though there are certain limitations for a life interest holder, it is also a very useful tool for distributing or bequeathing one’s property. It can be a good strategy to adopt depending on one’s requirements and necessity to dispose of the property.

The interest of oneself, one spouse and other family members can be reasonably protected by means of creating a life interest.

It can be ensured that the ultimate beneficiary does not deprive certain rights and benefits which are available to a life interest holder. If created by proper use of documents, it can also create an immediate interest and further result in transfer of property to the ultimate beneficiary without obtaining Probate or Letters of Administration. It can be used as an effective method of settlement of claims and disputes. It can be used as a balancing mechanism to reduce the scope of disputes and litigations. Further, it gives clear and exercisable rights for the persons in whose favor it is created.

As such, the usefulness of creating life interest in matters like Estate Planning cannot be understated.

It is however, advisable for a person to understand full implications of this in implementing a plan for the Estate.

A few issues may arise in the implementation of a Life Estate Plan. There could be a situation where the life interest holder survives the ultimate beneficiary.

Take for example, that ‘A’ creates a life interest in favors of ‘B’ and the ultimate interest in favour of ‘C’. It is possible that ‘C’ may die earlier than ‘B’. In such cases, ‘C”s legal heirs will be entitled to the interest of ‘C’.

There could be another instance where the life interest holder has alienated or purported to alienate his interest. In such cases, whether such interest will also last for the lifetime of the transferee in addition to the lifetime of the life interest holder may be an issue, which can arise. In such cases, it will last only during the lifetime of the original life interest holder. The life interest is a valid interest created in law and is recognized as such. In the event the property in which a life interest is created is to be sold, the life interest holder and the ultimate beneficiary can together sell or deal with the property provided they are otherwise competent to do so. The life interest holder can also receive a consideration for transferring his or her interest in such sale or other transactions.

Although, I have used the words “Ultimate Interest Holder”, ‘Ultimate Beneficiary’, etc, they are in law known as “Remainder-man”, meaning persons entitled to the ultimate estate. The difference is that they get an immediate interest in the property, but absolute ownership and title is postponed during the lifetime of the life interest holder. These words have to be understood in the context.

A life interest can be extinguished or released or relinquished in favour of the ultimate beneficiary as well. This has to be done by a proper document and registered wherever it is necessary. The ultimate beneficiary can also transfer his or her interest in favour of the life interest holder by a suitable document.

A person creating a life interest in favour of another has to undertake certain precautions. The life interest must be effectively created to meet the requirements and plans of the person granting the same.

These are only broad guidelines and it will be good for a person to take professional advice when creating or reserving life interest in properties. The intention of the person, who creates such interest, can be best implemented only if all the aspects relating to creation of life interest are fully understood and properly captured in a suitable document.

The author is partner, RANK Associates, Advocates, Chennai.

 Steel doors for stability

Steel doors fashioned like wooden doors are catching on

Enter the world of steel and you will know that every dealer is loud in his claim that he doesn’t steal the tree-cover.

“Steel doors can impersonate a wooden door, have exactly the same grains too for making it look woody and natural,” says a dealer of Mexin Steel Doors from China. And the steel doors indeed have an environmental inkling, as steel could be reused.

Steel doors in several makes are aplenty with fire-and-burglar proof properties.

While superior grades of steel are used in niche industries such as airlines and automobiles, the Sino-U.S. joint venture Mexin Group (also engaged in tree protection and replanting) thought of the 18-guage galvanized steel for doors which has received a good response.

But why steel for doors? Market sources reveal that heavy duty steel provides immense body strength, aren’t loosely held sheets, they are multi-level strength enhancers that resist abuse.

The top and bottom plates are sandwiched with a layer of polyurethane or honeycomb foam core, with one more layer of reinforced steel mesh. The surface is made to appear as natural wood with grains that have been given a high-grade finish. The bulky steel threshold and frame are other attractions.

And for the anti-burglary feature, it wraps in a 12-lever lock with a single key operation. A special shutter could be custom-made to help you see your visitor before opening the door that is if you don’t like the minuscule magic eyes available in the market. Teakwood, rosewood, pines or powder-coated in any colours... the finishing’s in the range of Rs. 14,000 to Rs. 25,000, depending on the size and features.

A Google-search for steel doors leads you to Entasafe doors with features such as rubber lining for the frame to prevent wind slam and dust.

It says a four-member family would open and close the main door a whopping 1, 09,500 times in 25 years! And Entasafe doors are designed to take the rigours.

Korean makes, with all the other fire-and-rust-proof features, boast of eight-lever locking clasp with both functional and aesthetic appeal.



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