Sometimes, two of my nephews will want to play with the same toy. Frequently, my proposed resolution to their conundrum is to allow one child to play with the toy first. After a period of time, the second child would get that same opportunity.
Ohio law allows for the same arrangements when it comes to real estate. In the context of real estate, people may want ownership of certain property to transfer when the current owner dies, upon some other condition occurring (such as remarriage or relocation) or for a certain number of years.
Typically, a person will own the entirety of a parcel of land until it is deeded to someone else. That type of ownership is called “fee simple.”
However, real estate can be titled to provide that the real estate is owned by a first person for a certain number of years (or until a certain event occurs), then to a second person for another period (defined by time or the happening of yet another event), and then to a third person under similar or no conditions. The current/present owner of the property owns and controls all aspects of the property while the current owner owns the property. However, the current owner may someday lose that ownership. This type of potentially less-than-forever current ownership is called “qualified fee.”
The most frequent type of qualified fee ownership in northwest and west central Ohio is a “life estate.” For example, a deed can provide that a person will own real estate for that person's life, and then ownership of the property will be moved to someone else.
The present owner owns the “fee” interest in the property. The “someone else” who is to receive the property upon the death of the fee owner is called a “remainderman,” regardless of that person's sex.
Traditionally, life estates were used to keep family legacy farmland “in the family.” For example, a husband may inherit a farm from his parents. The husband may then provide his wife with a “life estate” interest in the farm, with the remainder conveyed to the sons of the husband and wife upon the wife's passing. This structure would protect “the family farmland” from an unrelated man who could acquire ownership of the first husband's family's farmland by marrying the wife after the husband died.
Local attorneys may help clients use life estates in certain limited situations, for specific purposes. Some clients can realize certain tax savings and/or increase Medicaid eligibility through the use of life estates. Notably, a terminated life estate vests ownership in the remainderman without needing to involve the local probate court.
Historically, if a deed was not absolutely clear in indicating that it was conveying a “fee simple” interest, that deed conveyed only a life estate interest. In 1925, Ohio law reversed that presumption so that now every conveyance is presumed to be the conveyance of fee simple interest unless the deed clearly states that a life estate interest is being conveyed.
Lee R. Schroeder is an Ohio licensed attorney with Schroeder, Blankemeyer and Schroeder LLP in Ottawa. He limits his practice to business, real estate,estate planning and agriculture issues in northwest Ohio. He can be reached at email@example.com or at 419-523-5658. This article is not intended to serve as legal advice, and specific advice should be sought from the licensed attorney of your choice based upon the specific facts and circumstances that you face.