May 16, 2026
Around 20% of Americans expect to receive an inheritance, according to research from Northwestern Mutual (1). Among those planning to inherit, 57% say that the assets they have coming are "critical" or "highly critical" to their long-term financial security.
But what happens if this doesn't quite pan out?
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Let's say, for example, we have a 30-year-old man named Tom, who is married, makes around $50,000 a year, and is hoping to have a child soon. His father's been sick, and he's been taking care of him for years. He was anticipating that he would soon inherit his dad's house (mortgage-free) so that he could put down roots and start a family.
Now, however, he's just discovered that his dad isn't leaving him the house outright. Instead, he will be the life tenant, while his younger half-siblings get the house when he dies.
Now, Tom is left wondering what this means for his plans. Unfortunately, it's a big change compared with inheriting outright, and the news may not be what Tom wants to hear.
How a life estate affects your ownership interest in a house
When you are given a life estate, instead of outright ownership in a house, ownership and control of the property are shared.
- The person given the life estate is the life tenant. This means Tom has the exclusive right to use the house for his whole life, including living in it or renting it out and collecting all the income.
- The remainder interest goes to the remaindermen: The remainder interest is owned by those who get the house when the life tenant dies. In this case, that's his half-siblings. They are called remaindermen.
Since both the life tenant and the remaindermen technically own the house, control of the house is shared. You can't just do whatever you want with the home as a life tenant.
You cannot commit "waste," which means doing anything that significantly diminishes the value or destroys the property. You also must take care of the house, which means you're in charge of maintenance, repairs, upkeep, property taxes and insurance.
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And, you typically also face major practical limitations on doing things like taking out a new mortgage or selling the property without the permission of the remaindermen because they have a future interest in the house.
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How could this hurt your financial plans if you inherit a life estate?
Inheriting a life estate can be very limiting compared to getting outright ownership, and it could cause big problems for Tom.
Let's say he wanted to take out a mortgage to remodel the home to accommodate his growing family. Since he only has a life interest in the property, many mortgage lenders would be reluctant to lend against it because his ownership rights end at death. It's not very good collateral for the loan under those conditions.
And if he wanted to move, he couldn't sell the house outright without his half-siblings' permission, and they'd have a very reasonable right to request some of the proceeds from the sale if they agreed. He could sell the right to live in the house during his lifetime, but most people probably wouldn't want to buy that.
He also would not be able to leave the house to his wife or kids when he dies, because his death would trigger the transfer of the house to his half-siblings. They could have a big problem if Tom died young. If Tom died at 50, his life estate would end, and his half-siblings could take control and make his wife and kids move out at that time.
If Tom didn't maintain the property or pay the bills, his half-siblings could also take legal action and sue him for waste and for damaging the value of their future inheritance.
What is the best thing to do?
Ultimately, in this case, Tom may not be able to do a whole lot about these restrictions.
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He could potentially negotiate to buy out his half-siblings' interest in the house if he had the money. Or he could get them to agree to a deal to sell the house outright to someone else and split the proceeds, so he wouldn't be left in this sticky situation.
He could also rent out the property and use the money to pay for alternative housing for him and his family, but he'd ultimately be responsible for making sure the tenant was taking proper care of it, so it could be a hassle.
The right solution will depend on his goals, his relationship with his half-siblings, and what they are willing to do.
Unfortunately, Tom isn't going to get the inheritance that he may have been hoping for, or the security of owning a home outright, but hopefully, he will be able to work out a solution that gives him at least some good value for the house and makes everyone happy.
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Northwestern Mutual (1)
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Christy Bieber has 15 years of experience as a personal finance and legal writer. She has written for many publications including Forbes, Kilplinger, CNN, WSJ, Credit Karma, Insurify and more.
