One way that an owner of North Carolina real property may divide (or "split") its title into separate components is by retaining a life estate interest in the property while granting to another person or entity

a remainder interest in the property.  

 

The retained life estate must be defined by reference to the lifetime

of a named individual (usually but not necessarily the owner who grants

a remainder interest to another).

 

For example, “I grant my home to my son Jonathan, reserving

unto myself a life estate for and during my natural life....”

 

An owner may grant both a life estate and remainder interest to others. 

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​For example, “I grant my wife a life estate in and to my home, for and

during her natural life, and the remainder interest to my son Jonathan.”

 

The “life tenant” (the one retaining or given a life estate interest) has the exclusive right to possess,

rent and otherwise enjoy the use of the property during the lifetime of the named individual, after the death of whom the title and right of possession and enjoyment immediately and automatically transfers

to the “remainderman” (the one given the remainder interest, as for example “Jonathan” in the above examples).

 

Deeding a remainder interest in property to a child as in the first instance above serves both estate and tax planning purposes, as capital gains tax liability in the property will effectively be eliminated in most circumstances if the child sells it upon the parent’s death.  Search “capital gains life estate” to research this topic.

 

Deeding a remainder interest in your property may also serve purposes related to financial planning for the elderly, which is beyond the scope of this service.  Search “elder law life estate” to research this topic, and watch carefully for changes in the law.

 

Deeding a remainder interest in your property to another has significant consequences.  While the life tenant may dwell in the home, or move elsewhere and rent the home to a third person, the life tenant may not sell or refinance the property without the consent and joinder of the remainderman.

 

To determine the respective values of a life estate interest and remainder interest in North Carolina,

the NC Department of Health and Human Services has promulgated the following tool:

http://info.dhhs.state.nc.us/olm/manuals/dma/abd/chg/MA2230f4.pdf

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