Laws, Regulations & Annotations

C

220.0000 CHANGE IN OWNERSHIP

Annotation 220.0372.015

220.0372.015 Life Estate. A life estate interest may be terminated by the life tenant during his lifetime. However, when a life estate is transferred to the owner of the remainder interest in a property, the life estate ceases to exist and is merged into the remainder interest. The doctrine of merger stands for the proposition that whenever a greater estate (remainder fee interests) and a lesser estate (life estate) in the same parcel of real property are held by the same person, without an intermediate interest or estate, the lesser estate generally merges into the greater estate and is terminated.

Upon the grandmother's death, an irrevocable generation-skipping transfer trust was created for the lifetime benefit of grandfather. Upon grandfather's death, their son became the lifetime beneficiary of the trust, with a remainder interest in the son's child. The trust owns White Acre. Child owns Black Acre. Trust wants to transfer White Acre to Child in exchange for Black Acre.

If Son, the present beneficiary of the trust, transfers his life estate interest in White Acre to child, the owner of the remainder interest, this transfer would terminate the son's life estate interest and cause it to merge into Child's remainder interest. Child's remainder interest in White Acre would become a vested present beneficial ownership interest that Child will have received from his parent, not the trustor (grandmother). This transfer may be excluded from change in ownership as a parent-child transfer, provided the other requirements set forth in Revenue and Taxation Code section 63.1 are met. Similarly, the transfer of Black Acre from child to a trust in which parent is the beneficial owner may be excluded from change in ownership as a parent-child transfer. C 11/7/2006.