Here’s an interesting case. A sister and two brothers are named as owners on a deed. Sister also has life rights to the property. Sister wants to sell the house and the brother is okay with the sale; however, the sister claims she gets one-third of the property value PLUS a buyout of her life rights. Interesting demand.
A short, practical answer is that value is whatever they agree upon as value. If the sister can’t get brothers to go along with the sale, she cannot sell her interest without a buyer taking into account the cost and inconvenience of bringing a partition action (a partition action is a forced sale of real estate ordered by a court).
It is black letter law that a life estate has value. You can value it different ways but the inheritance tax statute uses tables based on the life expectancy of the holder. Subtract the life estate value from the fair market value of the property and you have the residuary value divided by three.
Let’s look at it this way: Sister has a one-third interest plus a life estate. Her siblings own two-thirds, depending on how the “life estate” is described in the deed. A true life estate does not terminate when the holder moves out; it terminates when she dies. She could theoretically rent out the house if she was living there and the brothers could not stop her. But I would argue that the life estate value only applies to two-thirds of the property value. She is entitled to one-third of the fair market value plus the value of her life estate against the siblings’ two-thirds interest.
To discuss your NJ estate administration matter, please contact Fredrick P. Niemann, Esq. toll-free at (855) 376-5291 or email him at fniemann@hnlawfirm.com. Please ask us about our video conferencing or telephone consultations if you are unable to come to our office.
By Fredrick P. Niemann, Esq. of Hanlon Niemann & Wright, a Freehold Township, Monmouth County, NJ Estate Administration Attorney