Life Estate and Property Taxes

[JoeV456]

What is the name of your state (only U.S. law)? Arkansas

In 2008, my father died intestate. He left behind his half of a commercial property in Arkansas; the other half is owned by my two cousins. Per Arkansas law, my step-mother received a life estate (something called a "fractional life estate") and I and my step-sister each received an undivided one-half interest in the property. My question is: who has to pay the property taxes on my family's portion of the property? My understanding is the Life Estate owner is responsible for those. My step-mother is saying my step sister and I each have to pay 1/4 of the taxes each. Who is right?

 

[tranquility]

It depends.

Generally, the life estate holder should pay.

The thing which is usually missing from this question is, what happens if they don't?

Express the possessor of the estate needs to pay. If it gets to a real argument, get an attorney or be prepared to lose the property.

 

[JoeV456]

Hmm. Ok. My cousin lives in Arkansas and is paying the taxes, but needs to be properly reimbursed. Thanks for your answer.

 

[justalayman]

What is the name of your state (only U.S. law)? Arkansas

In 2008, my father died intestate. He left behind his half of a commercial property in Arkansas; the other half is owned by my two cousins. Per Arkansas law, my step-mother received a life estate (something called a "fractional life estate") and I and my step-sister each received an undivided one-half interest in the property. My question is: who has to pay the property taxes on my family's portion of the property? My understanding is the Life Estate owner is responsible for those. My step-mother is saying my step sister and I each have to pay 1/4 of the taxes each. Who is right?

from what I can see, your step mother recieved a 1/3 life estate in her husbands interest (per state law), which was only 1/2 of the property. That means she has a 1/6 interest in the total property.

and I and my step-sister each received an undivided one-half interest in the property.

since dad did not own the entire interest in the property, you and sis could not each receive an undivided 1/2 interest in the property. You could share an undivided 1/2 interest in the property though because that is all that dad owned so that is all he can pass down to you.

What all that means is step mom is liable for 1/6 of the taxes. The cousins are responsible for a full 1/2 of the taxes and the remaining 1/3 are for you and sis to share.

 

[JoeV456]

from what I can see, your step mother recieved a 1/3 life estate in her husbands interest (per state law), which was only 1/2 of the property. That means she has a 1/6 interest in the total property.

No, not exactly. She has a "fractional life estate", of which I am not sure the exact meaning. As far as my step-sister and I, we each have a 1/2 undivided interest in OUR PORTION of the property. So we have half of a half. The question about taxes is not divided up per "owner". The person in a standard life estate situation is responsible for property taxes. I am unclear what it means for a fractional life estate, however. My understanding is that a life estate is a life estate and, according to Arkansas law, the holder of a life estate is responsible for property taxes. Because it is "fractional" and it is a commercial property, I am not sure if that holds true. I am low on funds or would consult a lawyer to clarify.

 

[justalayman]

yes, she has a fractional life estate and from what I could find quickly, that is a 1/3 interest in her spouses property. Since he owned only 1/2, that would give her a 1/3 interest of the 1/2 which is 1/6.

I, we each have a 1/2 undivided interest in OUR PORTION of the property. So we have half of a half.

that is different than what you said previously. You and sis share a 1/2 interest in the total property.

. The person in a standard life estate situation is responsible for property taxes.

if she had a full life estate you would be correct. As it is, she only holds interest in 1/6 of the property so she only owes 1/6 of the taxes. You and sis hold the other 1/3 of the property, right now, not a future interest, and when step mom dies, you get the remaining 1/6 (of the total).

I am unclear what it means for a fractional life estate, however. My understanding is that a life estate is a life estate and, according to Arkansas law, the holder of a life estate is responsible for property taxes.

a fractional life estate is just that. She only has a life estate interest in what is proscribed by law which is 1/3 of her husbands interest.

why should she be responsible for a full 1/2 of the property taxes (her husbands share when alive) when she is only entitled to 1/6 (of the whole) benefits. Whatever that property earns, she only gets 1/6 of it. The cousins get 1/2 and you and sis get the remaining 1/3.

 

[JoeV456]

Thanks for your reply.

As far as my original post, I stated that my father owned half the property and my cousins owned the other half. When he died, he left his half to us (in whatever form). There isn't a way he could have left us the part of the property owned by my cousins, so it only follows that we have half of a half. Anyway..

As far as Life Estate is concerned, it is rather tricky and the Life Estate holder gets any proceeds from rent or use of timber etc..They also pay property taxes and get the tax break from that when claiming it as a deduction. Regardless of the portion of the estate they receive, which is not necessarily 1/3, even in a full life estate, they are responsible for property taxes. Why that is so, you would need to ask the people who made the laws.

Where did you find the definition for "fractional life estate"? I was unable to do so.

 

[justalayman]

=JoeV456;2916094]

As far as Life Estate is concerned, it is rather tricky and the Life Estate holder gets any proceeds from rent or use of timber etc.

.If she had a life estate in 100% of the property, yes but since she only has a 1/3 interest in 1/2 of the property, she pays 1/6 of the total expenses and is due 1/6 of the total income.

They also pay property taxes and get the tax break from that when claiming it as a deduction. Regardless of the portion of the estate they receive, which is not necessarily 1/3, even in a full life estate, they are responsible for property taxes. Why that is so, you would need to ask the people who made the laws.

So, please show me where the laws state this.

Where did you find the definition for "fractional life estate"? I was unable to do so.

In the state laws.

 

[JoeV456]

Interesting. I was unable to access the state laws, although I did check the Arkansas.gov website. I found it last year, when I was researching this issue, which is where I read in detail the responsibilities of a life estate holder. Here is a link, though, that discusses it as answered by a lawyer. Did you access the state laws online?


Q: “The state is AR. What is a life estate owner responsible for i.e property taxes, house insurance ect.?”

A: The holder of the life estate is responsible for paying taxes, maintaining the property in good repair, and not permitting it to suffer any "waste" or other damage. As long as the life tenant fulfills these duties, no other owners have a basis to complain.

Remaindermen do not have a right to enter or possess the property until their future interest becomes a present interest (i.e. when the life estate owner dies). If remaindermen suspect waste, they can sue for an injunction (a court order stopping the action of waste from continuing) and/or sue for damages to the property.

Read more: What are the responsibilities of a life estate holder as it - JustAnswer What are the responsibilities of a life estate holder as it - JustAnswer

 

[justalayman]

Yes, Arkansas statutes, online.

Your link does not address a fractional life estate holder. It speaks to a person that holds the entire estate (100%).

28-11-301. Land generally.

(a) If a person dies leaving a surviving spouse and a child or children, the surviving spouse shall be endowed of the third part of all the lands for life whereof his or her spouse was seized, of an estate of inheritance, at any time during the marriage, unless the endowment shall have been relinquished in legal form.

(b) A person shall have a dower or curtesy right in lands sold in the lifetime of his or her spouse without consent of the spouse in legal form against all creditors of the estate.

 

[JoeV456]

By any chance, do you have a link to those? Could you post it?

 

[justalayman]

Home

left hand side about 3/4 the way down. That takes you to this:

LexisNexis® Custom Solution: Arkansas Code Research Tool

and then when you click "ok", you get this:

LexisNexis® Custom Solution: Arkansas Code Research Tool

then, title 28 is "Wills, Estates, and Fiduciary Relationships"

 

[JoeV456]

Thanks so much. I appreciate it.

 

[JoeV456]

Just to clarify, justalayman was incorrect. I say this for anybody who is in a similar situation and looking for information. I received notice from the lawyer who handled the estate settlement that the Life Estate holder, regardless of how much of the property is held, is responsible for the property taxes on the part of the property they have been given a Life Estate. In this case, it was half of the property, which my step-sister and I also have an interest in. Because my father died intestate, my step-mother received a 1/3 life estate whose value is determined upon sale of the property. The value is determined by a fairly complex formula that has to do with the value of the property when sold as well as other variables. Even though I have an undivided one-half interest in the property, I am still considered a remaindermen and do not pay property taxes for the property.

My other statements regarding the Life Estate holders responsibilities, and benefits, are also valid.

 

[justalayman]

Just to clarify, justalayman was incorrect. I say this for anybody who is in a similar situation and looking for information. I received notice from the lawyer who handled the estate settlement that the Life Estate holder, regardless of how much of the property is held, is responsible for the property taxes on the part of the property they have been given a Life Estate. In this case, it was half of the property, which my step-sister and I also have an interest in. Because my father died intestate, my step-mother received a 1/3 life estate whose value is determined upon sale of the property. The value is determined by a fairly complex formula that has to do with the value of the property when sold as well as other variables. Even though I have an undivided one-half interest in the property, I am still considered a remaindermen and do not pay property taxes for the property.

My other statements regarding the Life Estate holders responsibilities, and benefits, are also valid.

Hold it. You just proclaimed I was wrong yet went on to say I was correct.

Life Estate holder, regardless of how much of the property is held, is responsible for the property taxes on the part of the property they have been given a Life Estate.

that is exactly what I said. Mom has a 1/6 interest in the property as a life tenant so even by your own statement, she would be liable for 1/6 of the expenses.

You seem to suggest she was given a life estate in a specific portion of the property though. You have said nothing previously that would suggest that is the case. IF that is the case, then the answers may be different but that is not what you explained things to be.

Hicks v. Hicks, 348 So. 2d 1368, 1370-71 (Ala. 1977)

"2. A life tenant in a fractional interest in the property and the other owner, of the remaining fractional life estate and the remainder, are joint tenants or tenants in common and either can bring an action against the other for the partition [or] sale for division ....."

by definition, joint tenants or tenant in common have an equal right of possession of a property as well as an equal liability (per their share of ownership) for expenses to the property unless otherwise specified.