Unlocking the Secrets of Life Interest in Wills

Introduction

1. Life interest is a legal term used in estate planning to describe a situation where a person (the life tenant) is granted the right to use and benefit from a property or asset for the duration of their lifetime. However, the life tenant has no right to sell or transfer the ownership of the property. Upon the life tenant’s death, the property passes to another person or entity (the remainderman).
2. How is a is life interest created? A life interest is typically established through a will or trust. It allows the life tenant to live in a property, earn income from it, or use it in any other way specified in the will, without owning it. This arrangement ensures that the property eventually goes to the children of the deceased or beneficiaries named in the will.

Case Law on Life Interest

Some notable cases include:-

1. Re Smith[1]. This case involved a dispute over the interpretation of a will that granted a life interest in a property. The court had to determine the extent of the life tenant’s rights and the rights of the remaindermen. The ruling clarified the legal principles governing life interests and the duties of the life tenant to maintain the property. These principles ensure that the life tenant can benefit from the property during their lifetime while preserving its value for the remainder beneficiaries. These are:-
2. Duty to Maintain the Property: The life tenant is responsible for maintaining the property in good condition. This includes making necessary repairs and ensuring that the property does not deteriorate.
3. Duty Not to Commit Waste: The life tenant must not commit waste, meaning they should not do anything that would significantly reduce the value of the property. This includes both voluntary waste (deliberate damage) and permissive waste (neglect).
4. Duty to Pay Taxes and Expenses: The life tenant is responsible for paying property taxes, insurance, and other necessary expenses related to the property.
5. Right to Use and Enjoy the Property: The life tenant has the right to use and enjoy the property during their lifetime. This includes living in the property, renting it out, or using it in any other way specified in the will.

No Right to Sell or Transfer the Property: The life tenant does not have the right to sell or transfer the ownership of the property. They can only use it for their lifetime, and upon their death, the property passes to the remainderman.

1. Re Breeze[2]. The case involved a dispute over the life tenant’s rights and responsibilities in managing the property. The life tenant had made significant alterations and improvements to the property, which the remaindermen argued had either diminished its value or changed its character in ways not permitted by the terms of the will. The New York Supreme Court ruled that, while a life tenant has the right to reasonable use and enjoyment of the property, they do not have the right to make substantial alterations that could harm the interests of the remaindermen. The court found that the life tenants had overstepped their rights and ordered them to restore the property to its original state or compensate the remaindermen for the loss in value.
2. Tau Katungi v Margrethe Thorning Katungi & Peter David Belford Walker[3]: The case involved a dispute on life interest of a surviving spouse. The Applicant (the deceased’s son) sought that the value of his share in the deceased’s estate be ascertained and paid out to him in full in monetary terms. A certificate of confirmation of the grant issued in the estate stated that the widow was entitled to a life interest, or until her remarriage on the estate and that the deceased’s children, including the Applicant, were to take whole residue of the intestate estate as tenants in common in equal shares absolutely, subject to the life interest of the widow determinable on her remarriage. The court held that the effect of Section 35(1) of the Law of Succession Act is that the children of the deceased are not entitled to access the net intestate estate so long as there is a surviving spouse.  The children’s right to the property crystallises upon the determination of the life interest following the death of the life interest holder or her remarriage.  Before that, the widow would be entitled to exclusive right over the net estate.  This means that if the net estate is generating income, she would be the person entitled exclusively to the income so generated.
3. Shamit Shantilal Shah Vs Kanchanben Ramniklal Shah Premchand Kanji Shah^[4]: In this case, the deceased died testate. He was unmarried and left no children. In his will, the deceased appointed Shamit (the appellant, Dr. Ramniklal Khimji Shah (his brother-in-Law) and Kanchanben, his sister (the respondent) to be executors and trustees to his will for the purposes of dealing with all his properties in the Republic of Kenya.  In the Will, the deceased bequeathed all his Kenyan estate to his sister (the respondent) save for his house in Nairobi which he gave the respondent and her late husband Dr. Ramniklal Khimji Shah life interest, to use it and after their respective deaths, the property would be transferred to the appellant. The Grant of Probate of Written Will was issued to the appellant and the respondent was subsequently confirmed.  The appellant then filed an application seeking an order that the respondent transfers the Nairobi property to him, subject to the respondent’s life interest under the Will, “to finalize administration of the deceased’s estate.” The question was whether the appellant’s assertion that Nairobi property should be transferred him during the respondent’s lifetime was in conformity with the will.  The High Court dismissed the appellant’s application on grounds that it was premature.  Aggrieved, the appellant appealed to the Court of Appeal. The Court of Appeal, in a recent decision^[5], agreed with the High Court that the application was premature and held that:

“A reading of clause 2 [of the will] leaves no doubt that the deceased intended that the Respondent and her husband (also deceased) reside on the property during their lifetime and upon their respective deaths, the said property would be given to the appellant absolutely”.

Advantages of Life Interest

• Security for the Life Tenant: The life tenant has the right to use the property without the risk of losing it. In Tau Katungi v Margrethe Thorning Katungi & Peter David Belford Walker (supra), which was in the context of intestate succession,  the court ruled that thatthe device of life interest is designed to safeguard the position of the surviving spouse.  The ultimate destination of the net intestate estate, where there are surviving children, is the children.  However, if the property passes directly to the children, in cases where there is a surviving spouse, he or she is likely to be exposed to destitution, particularly where the surviving spouse was wholly dependent on the departed spouse.  
• Control Over the Estate: The person creating the will can control who ultimately inherits the property.
• Protection of Assets: It prevents the property from being sold or transferred to unintended parties. It also protects assets from being used as security for borrowing thereby ensuring that they are preserved for future beneficiaries.
• Protection of the interest of the remainderman: A life tenant cannot, during life interest, dispose of any property subject to that life interest without the consent of all the adult remaindermen, co-trustees and the court. This is meant to safeguard the interest of the remainderman who is the ultimate beneficiary.  It is in this respect that the life interest operates as a trust over the property the subject thereof, a trust held by the life tenant for the benefit of the remainderman.
• Safeguarding the interests of blended families and second marriages: Life interest ensures that a surviving spouse can live in the family home for the rest of their life, while the property eventually goes to the children from a previous relationship. It also provides security for a new spouse while ensuring that the estate ultimately goes to the children from a previous marriage.

 Conclusion

• Life interest is a valuable tool in estate planning, providing security and protection for both the life tenant and the remainder beneficiaries. Understanding its legal implications and case law can help individuals make informed decisions when drafting their wills. Case law highlights the importance of clearly defining the rights and responsibilities of life tenants and remaindermen in wills and trusts. They also underscore the need for careful drafting, with the assistance of legal counsel,  to avoid potential disputes.

[1] (1928) 1 Ch 915

[2]  52 A.D.3d 424 (1st Dept 2008)

[3] Succession Cause 1040 of 1991) [2014] KEHC 3226 (KLR)

[4] Civil Appeal No. 137 of 2019

[5] delivered on 25th October 2024

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