Legal Question in Real Estate Law in Connecticut

Re: Life Estate

A life estate means the person has the right to non-destructive use of the property until they die. They can not sell the property without the permission of all the remainder people [those who have the right to the property once the life tenants no longer is using it]. If title insurance was taken out, the report the title company prepares should have stated that the seller only had a life estate and the buyer would have purchased it with that knowledge. The sale can be set aside because the buyer should have known they were not buying title from some one to had title to the property. If the title company did not state that, then it can be sued for negligence in preparing the title report.

Are you sure that the person with the life estate was not also given the right to sell the property [so more than a life estate]?

Re: Life Estate

Of course, this question can be answered definitively only by an attorney licensed to practice in Connecticut. Nevertheless, there are some general principles regarding life estates that are more or less universally accepted throughout the English common-law jurisdictions, which include all U.S. states except Louisiana.

One of these fairly universal precepts is that the life tenant can sell or lease whatever the life tenant has, but not more.

A couple other interesting (if not necessarily germane here) concepts are (1) that the life tenancy can be measured by the life of someone other than the life tenant, e.g., "X can live in Blackacre so long as Y shall survive;" and (2) a life tenancy can be set up to terminate upon some event other than the death of the measuring life, e.g., "X can live at Blackacre so long as she lives and makes it her principal residence."

As I understand it, all eight of you, including the life tenant and the remaindermen, have agreed to sell (or maybe circumstances force you to ask about valuation even though a sale is doubtful).

The answer is that this should be treated more like an exercise in Yale grad school of business quantitative methods rather than a legal question. Starting with the legal concept that a life estate is transferable and thus has some market value, but not all life estates are created equal, you would figure the rental value of the property during the expected remaining duration of the life tenancy, then discount each annual net rental value to a present worth; then discount the lump sum values of all the remainder interests. This will give you a rough tool for comparing the remainder interests with the life estate. Selection of an appropriate discount rate and finding reasonable values for the interim rental value and the future market value would require the wisdom of Solomon.

But, the short answer is that the value of the life estate plays a major role, and since the possibly 20-year-off termination of the life estate involves a heavy discount, even at a low discount rate, the holder of the life estate should be entitled to a lion's share of the price received today. No, the proceeds should NOT be divided equally! However, the valuation of perhaps 20 plus-or-minus years of sole possession requires heavy use of the mathematics of finance as well as perhaps some actuarial science.