What you need to know about granting a life estate in Missouri

Disclaimer: This is educational information only and not legal advice. Consult a licensed Missouri attorney before creating, modifying, or recording any property interest.

Detailed answer

A life estate is a property interest that gives one person (the life tenant) the right to use and possess real estate for the duration of that person’s life. At the life tenant’s death, the property automatically passes to the remainderman(s) named in the deed, or reverts to the grantor if no remainderman is named.

Below I explain key risks and practical effects you should consider if owners of Missouri real property choose to grant a life estate to the other owner instead of selling the property.

1. Loss of marketability and difficulty selling or financing

A life estate splits ownership into two competing interests: the life estate (present possessory interest) and the remainder (future interest). Most buyers and lenders accept only clear fee simple title. With a life estate in place, you generally cannot sell clear fee simple title without the life tenant’s cooperation. A lender is often unwilling to make a loan to a life tenant unless the remainderman also joins and subordinations/consents are provided. That makes converting the property to cash or refinancing more complicated.

2. Life tenant’s broad rights to possess and occupy

While the life tenant lives, they typically have the exclusive right to occupy and use the property. The life tenant may live on the property, collect rents (if rented), and control day-to-day use. If the other owner becomes the life tenant, the grantor (remainderman) loses practical control of the property during the life tenant’s lifetime.

3. Duties, maintenance, taxes, and insurance

Missouri law and general property principles treat the life tenant as responsible for ordinary maintenance, property taxes, and routine costs of possession. The remainderman generally must pay to preserve the remainder interest from major expenses (sometimes subject to reimbursement rules). Confusion over who pays for repairs, capital improvements, or insurance commonly leads to disputes.

4. Risk of waste

The life tenant must not commit “waste” — unreasonable destruction or depletion of the property that injures the remainder interest. But what constitutes waste is often litigated. A life tenant may still make changes or extract value in ways the remainderman finds objectionable, and that can force court action to resolve.

5. Creditor claims and liens against the life tenant

A life tenant’s creditors can sometimes attach liens to the life tenant’s interest in the property. While the life tenant’s interest is not a full fee simple, a lien or judgment could complicate title and reduce the remainderman’s future value. Conversely, a lien on the property (eg, for unpaid taxes) may need to be resolved by both life tenant and remainderman.

6. Medicaid, long-term care, and estate-recovery concerns

Life estate transfers can affect Medicaid eligibility and later Medicaid estate recovery. If a grant is made close in time to an applicant’s Medicaid application, a transfer could trigger a period of ineligibility or an estate recovery claim. Consult both an elder-law attorney and a benefits specialist before using life estates for Medicaid planning.

7. Tax consequences

Creating a life estate can have gift-tax, income-tax, and capital-gains-tax consequences. For federal income and estate tax purposes, the valuation of a retained life estate or remainder interest follows IRS valuation rules. Basis and step-up issues at death can be complex and depend on who holds which interest at death. Talk with a tax advisor before transferring interests.

8. Potential for family disputes and unintended heirs

If you grant a life estate to the other owner and name yourself (or others) as remaindermen, family members or heirs may contest the conveyance after the life tenant dies. That risk increases if the deed language lacks clarity, if the grantor lacked capacity at signing, or if later facts suggest undue influence.

9. Creation, recording, and drafting risks

A life estate must be created by a proper deed with clear language describing the life estate and the remainder. Mistakes in deed language, improper notarization, or failing to record the deed with the county recorder’s office can leave parties with unclear or defective title. Always use precise deed language drafted or reviewed by an attorney and record promptly.

10. Partition and sale options

Co-owners holding different interests can still sometimes force partition in kind or by sale in Missouri courts. But partition litigation is costly, uncertain, and may not produce a sale price that either party wants. Granting a life estate does not eliminate the risk of future litigation if owners disagree.

Practical hypothetical

Example: Two siblings co-own a house. Sibling A offers to convey a life estate to Sibling B (so B can live in the house until B’s death), with A retaining the remainder. If B accepts the life estate, B can live in the house, collect rent, and be responsible for routine upkeep; A cannot sell the house free of B’s lifetime interest. If B runs up debts, a creditor might attach B’s life interest, making it harder for A to clear title later. If B needs Medicaid, the transfer timing could create problems. If the deed omitted clear remainder language, ownership after B’s death could become litigated.

Relevant Missouri statutory resources

Missouri does not have a single statute that governs all life-estate issues; life estates arise under general conveyance, recording, and property law. For official Missouri statutory and code resources, search the Missouri Revisor of Statutes for terms like “life estate,” “recording,” and “conveyance.”

Because statutory and case law can affect how life estates operate in particular situations, use the links above to read the Missouri statutes and then confirm specifics with a Missouri attorney.

When a life estate might still make sense

Granting a life estate can be appropriate when parties want clear, lifetime occupancy for a person (for example, an elderly parent who should not be displaced) while preserving future ownership for heirs. It can also simplify some probate questions and avoid transferring full title immediately. But those benefits come with the risks listed above.

Helpful hints

Get a precise deed: Use clear, legally correct deed language that identifies the life tenant, the measuring life (usually the life tenant), and the remainderman(s).
Record promptly: File the deed with the county recorder to protect notice to third parties.
Address expenses: Put responsibilities for taxes, insurance, routine maintenance, and major repairs in writing.
Consider buyout or sale provisions: Add a mechanism for the remainderman and life tenant to negotiate or force a sale on agreed terms to avoid future litigation.
Check creditor and lien exposure: Run title searches and resolve existing liens before completing the transfer.
Consult an elder-law or Medicaid specialist: If the life tenant may need government benefits, obtain counsel to understand timing and eligibility effects.
Talk to a tax advisor: Confirm gift, income, or estate tax implications before signing.
Plan for contingencies: Include provisions for incapacity, relocation, or condemnation events if appropriate.
Consider alternatives: A sale, a buyout, tenancy-in-common with a written agreement, or a trust could meet your goals with different trade-offs.
Hire a Missouri real property attorney: An attorney will draft the deed correctly, explain local recording practices, and advise on remedies and risks specific to your county and facts.

If you want, provide brief facts about your ownership arrangement (how title is held, ages and health of parties, whether there are mortgages or liens, and the goal of the proposed transfer) and I can outline the specific issues to review with an attorney.