Chapter 2: The Life Estate & The Reversion

This is the final excerpt from my book titled 'Phillips on Land Title Examination: Estates in Blackacre.'

Please read!

The previous chapter dealt with the fee simple absolute. In this chapter, we will begin to examine what happens when the holder of a fee simple absolute attempts to transfer less than the entire fee simple absolute. As you will see, a transfer of less than the entire fee simple absolute creates, by logic, estates of both present and future possession.

I begin with a presentation of the life estate and the reversion. The life estate is fairly straight forward and will warm us up for the defeasible fee simples that are to follow.

Hey, some kids have their blanket, I have my writing. I love writing; it listens to me.

What is a life estate? A life estate is true to its name. It is an estate in land that endures for the life of its owner. The moment the holder of the life estate dies is the moment the life estate is terminated. The life estate is an estate of present possession. It is not inheritable, except in the limited case of the life estate per autre vie. Furthermore, dower does not attach in the case of a male life estate holder. The parameters of the life estate are very important to understand. I have reviewed numerous documents in which the preparer was asking for a probate regarding a deceased holder of a life estate, or the preparer was requesting a release of dower rights of the spouse of a male life estate holder. This is a complete misunderstanding of the life estate.

Refer to the Table of Corresponding Estates displayed in the beginning of this writing. You will see that the life estate, an estate of present possession, corresponds with the reversion, an estate of future possession.

*Calculus of Estates → life estate + reversion = fee simple absolute.

The fee simple absolute represents an entire line segment. When the fee simple absolute line is broken, the fee simple absolute is destroyed, resulting in the creation of new estates. The fee simple absolute line is broken by the conveyance of a life estate.

Let me demonstrate this:

Let's say that Bill Smith is the owner of blackacre in fee simple absolute. Bill Smith then conveys a life estate to Shirley Thomas. How does this affect the ownership of the property? To answer this question we must determine what new estates are created by Bill's transfer to Shirley.

We know that Bill Smith has conveyed a life estate to Shirley Thomas. Bill Smith, by conveying a life estate, has carved out a piece of his fee simple absolute. Remember that to satisfy the calculus of estates, the entire line must add up to a fee simple absolute. Does the conveyance of a life estate to Shirley add up to a fee simple absolute? The obvious answer is no. So, what follows Shirley's life estate?

When Shirley's life estate terminates, we call Bill's remaining interest a reversion. When Shirley dies, the property reverts back to Bill in fee simple absolute. Put another way, Bill conveyed a life estate, which is less than a fee simple absolute. Bill's retained interest is called a reversion. Upon Shirley's death, the property will automatically revert back to Bill Smith. Bill’s reversion will immediately ripen into a fee simple absolute.

*Calculus of Estates → life estate in favor of Shirley + reversion in favor of Bill = fee simple absolute.

Question: Why would Bill want to convey a life estate to Shirley?

The answers are many, but maybe Bill simply wants Shirley to have a place to live during her lifetime. Remember, the property will eventually make its way back into Bill’s family tree; upon Shirley’s death. The life estate offers Bill an estate vehicle by which he can transfer present possession to Shirley, legally, while guaranteeing that blackacre will find its way back into Bill’s family.

Additionally, maybe Bill owes a debt to Shirley. In this case, a life estate may be utilized as a form of repayment for such debt. From Bill’s point of view, the land is being used productively; for the payoff of an existing debt.

Question: Using the above example, what happens if Bill dies before Shirley?

Answer: Bill’s reversion passes to his estate. If Bill has not voluntarily conveyed his reversion prior to his death, his reversion will pass to his heir(s). The death of Bill will not disrupt the life estate held by Shirley.

Examples Creating a Life Estate & Reversion:

Conveyance #1: Mr. X, a single man, owner in fee simple absolute, conveys a life estate to Dave Phillips.

State of Title: Life estate in favor of Dave Phillips with reversion in favor of Mr. X.

This conveyance creates a life estate and a reversion and thereby satisfies the calculus of estates.

Upon Dave’s death, the reversion held by Mr. X will activate and Mr. X will once again own in fee simple absolute.

Conveyance #2: Dave Phillips, a single man, owner in fee simple absolute, conveys to Rick Phillips, for life.

State of Title: Life estate in favor of Rick Phillips with reversion in favor of Dave Phillips.

This conveyance creates a life estate and a reversion and thereby satisfies the calculus of estates.

Upon Rick’s death, the reversion held by Dave will activate and Dave will once again own in fee simple absolute.

Nuance:

A life estate may be granted or reserved. Let me show you how this works.

In the above examples, a life estate was granted, with a reversion retained by the grantor. However, it is possible for the grantor in a deed to reserve a life estate in himself.

Example: Dave Phillips, a single man, conveys to Rick Phillips. This appears to be a conveyance in fee simple absolute. But in reviewing the full body of the deed the examiner spots a recital, which reads: “Reserving a life estate in favor of the grantor herein.”

State of Title: Rick Phillips, together with a life estate in favor of Dave Phillips.

*Reservation of a life estate is usually effectuated by way of recital within the body of the deed, so make sure you always read the entire deed. Let me repeat this: The entire deed.

How does a reservation differ from a grant?

There is a significant difference between a reservation and a grant. As we already know, when a life estate is granted, there is created an estate of future possession; that being the reversion. When a life estate is reserved in the grantor, the grantor is actually creating two estates of present possession; that being a fee simple in favor of the grantee and a life estate in favor of the grantor, the person reserving the life estate.

This was demonstrated in the above example with Rick and Dave Phillips.

I have an interesting question. Can the holder of a life estate convey its interest?

The answer is yes, but with a direct condition. Remember that a life estate is an estate that is exclusive to the owner of the life estate. A life estate terminates upon the death of the original life estate owner, regardless of any transfer of the life estate interest. Transfer of an existing life estate interest creates the so-called life estate per autre vie.

The Life Estate Per Autre Vie:

When the holder of a life estate conveys his interest to another, he has created a life estate per autre vie. Life estate per autre vie can be defined as: for the life of another.

Here’s how it works:

Conveyance #1: Dave Phillips, owner in fee simple absolute, conveys blackacre to Rick Phillips, reserving a life estate in himself.

State of Title: Rick Phillips, with life estate in favor of Dave Phillips.

Subsequently, Dave conveys his life estate interest to Larry the Cable Guy. Larry the Cable Guy now owns a life estate interest, but only for the life of Dave. If Dave dies before Larry the Cable Guy, Larry’s interest is immediately destroyed. After Dave’s death, Rick Phillips would own blackacre in fee simple absolute, free of the interest of Larry.

Conveyance #2: Mike Thomas, a single man, owner in fee simple absolute, conveys blackacre to Sharon Phillips, reserving a life estate in himself.

State of Title: Sharon Phillips, with life estate in favor of Mike Thomas.

Nuance:

A life estate interest dies with its owner. However, a unique situation is created with the life estate per autre vie.

To demonstrate this, I will use conveyance #2 above as our example:

Original State of Title: Sharon Phillips, with life estate in favor of Mike Thomas.

Subsequent Conveyance: Mike Thomas conveys his life estate interest to Elvis Presley.

Resulting State of Title: Sharon Phillips, with life estate per autre vie in favor of Elvis Presley.

Now, here is what is interesting. Elvis’s life estate will terminate upon the death of Mike Thomas, the original life estate holder. But what happens if Elvis dies before Mike Thomas?

Answer: The estate of Elvis Presley would succeed to Elvis’s life estate per autre vie. Elvis’s estate would then hold a life estate per autre vie until the death of Mike Thomas. The analysis goes like this: A life estate per autre vie is a life estate that is measured against the life of another. In our example, Mike Thomas is the measuring life, not Elvis. As a result, the life estate and the life estate per autre vie will continue to exist until the death of the original life estate holder. This example represents the unique situation in which a life estate is inheritable.

So, when examining a chain of title, make certain to identify whether you are dealing with a straight life estate, or the more complex life estate per autre vie. If you have a life estate per autre vie, go back and identify the original life estate holder.

The life estate per autre vie can cause many practical problems. Many people are caught completely off guard when they find out their supposed life estate interest has been terminated due to the death of their grantor. In Michigan, the joint tenancy with full rights of survivorship is an example of how the life estate per autre vie can cause unsuspected loss of possession to its holder. In chapter eleven I will be discussing the joint tenancy with full rights of survivorship and the unique problems it can create within the State of Michigan.

Whenever you see a conveyance of an existing life estate interest, you are looking at a life estate per autre vie. The life estate per autre vie measures the duration of the subsequent life estate owner against the original holder. It is sneaky stuff, but not difficult stuff if you understand the parameters of the life estate.

The Grant of a Life Estate With Power to Convey:

Another nuance regarding the life estate that you will encounter is the so-called life estate with power to convey. This is not a difficult topic. Here’s how it works.

Example: George Strait, a single man, as grantor, conveys to George Strait, a life estate with power to convey, and if the land is not disposed of upon the death of George Strait, then to Kenny Chesney in fee simple absolute.

We’re up to our you-know-whats in alligators now! What the heck does this conveyance mean?

In the above conveyance, George Strait has created two estates. He created an estate of present possession in himself, that being a life estate with full power to convey. He also created a contingent remainder in favor of Kenny Chesney.

The life estate with full power to convey enables George Strait to convey blackacre, as well as mortgage blackacre. He can do so completely free of the interest of Kenny Chesney. Furthermore, if George conveys the property, or if the property is foreclosed pursuant to a mortgage given by George, Kenny’s interest is completely destroyed.

The potential for Kenny Chesney’s interest to be destroyed is what makes his interest contingent. It is termed a contingent remainder because Kenny’s possession is contingent upon George not conveying prior to George’s death. If George dies without having conveyed, Kenny’s contingent remainder will vest. Kenny will then be the owner in fee simple absolute.

Just remember, when you are faced with a life estate with full power to convey, the holder of this right has absolute power to dispose of or encumber blackacre.

The life estate with power to convey is a frequently used estate tool within Michigan.

State of Title:

You may have noticed my use of the term state of title in numerous areas of this program. The state of title represents the actual ownership of blackacre. The state of title is often referred to as the vesting line. The vesting line is what is displayed in your title commitment on Schedule A. Very important to get it right.

More Examples:

(Scenario #1): The Life Estate & the Reversion.

Conveyance: Dave Phillips, a single man, owner in fee simple absolute, conveys to Rick Phillips, for life.

State of Title: Life estate in favor of Rick Phillips with reversion in favor of Dave Phillips.

*The above state of title is how you would display the vesting line on Schedule A.

*The life estate and the reversion add up to a fee simple absolute, thereby satisfying the calculus of estates.

(Scenario #2): Creation of a Life Estate by Reservation.

Conveyance: Dave Phillips, a single man, owner in fee simple absolute, conveys to Rick Phillips, reserving a life estate in favor of the grantor herein.

State of Title: Rick Phillips, together with a life estate in favor of Dave Phillips.

*The above state of title is how you would display the vesting line on Schedule A.

*This is a unique state of title in that Rick Phillips holds a fee simple and Dave Phillips holds a life estate. This state of title satisfies the calculus of estates.

(Scenario #3): Creation of a Life Estate Per Autre Vie.

Original Conveyance: Dave Phillips, a single man, owner in fee simple absolute, conveys to Rick Phillips, reserving a life estate in favor of the grantor herein.

Original State of Title: Rick Phillips, together with a life estate in favor of Dave Phillips.

Subsequent Conveyance: Dave Phillips, holder of a life estate, conveys to Angela Warner.

Subsequent State of Title: Rick Phillips, together with a life estate per autre vie in favor of Angela Warner.

*The above state of title discloses the life estate per autre vie, which lets all parties know that Angela’s life estate interest is contingent upon the survival of Dave Phillips.

*This is a unique state of title in that Rick Phillips holds a fee simple and Angela Warner holds a life estate per autre vie. This state of title satisfies the calculus of estates.

(Scenario #4): Creation of a Life Estate With Power To Convey.

Conveyance: George Strait, a single man, conveys to George Strait, a life estate with full power to convey, and if the land is not disposed of upon my death, then to Kenny Chesney in fee simple absolute.

State of Title: Life estate with power to convey in favor of George Strait, with contingent remainder in favor of Kenny Chesney.

*The above state of title discloses to all parties that George Strait has full power to dispose of or encumber the subject property.

*This is a unique state of title in that George Strait may freely convey his interest at any time prior to his death, effectively terminating the interest of Mr. Chesney. If he has not conveyed, Kenny’s contingent remainder will vest and his vested remainder will immediately ripen into a fee simple absolute.

The life estate with power to convey and the contingent remainder, when added together, satisfy the calculus of estates.

Summary:

The life estate is exclusive to its holder. When the holder of the life estate dies, the life estate is terminated and the reversion is activated. This reversion immediately ripens into a fee simple absolute. The granting of a straight life estate will automatically create a reversion in the grantor.

I have discussed the unique aspects of a life estate. A life estate can be created by grant or reservation. A life estate holder may convey his life estate interest to another, subject to the life span of the original life estate holder; the so-called life estate per autre vie. I also discussed the creation of the so-called life estate with power to convey. The life estate with power to convey offers its holder full power to dispose of or encumber blackacre, while providing for the transfer of blackacre to a contingent remainderman.

Note: I want you to think of the fee simple absolute as the starting point in all discussions of the estates. It is the mother ship of all our estates. When any interest in the fee simple absolute is carved out, new estates are thereby created. It is your job as an examiner to determine these estates. You accomplish this by utilizing the calculus of estates, and you display this via the state of title.

In the next chapter, we begin a study of the defeasible fee simple estates. Chapter three will concern the fee simple determinable and the possibility of reverter.

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