The discounted cash flow method (as part of the income approach) is often used to estimate the fair value of a life equity stake in real estate. This method makes it possible to estimate the future net cash flow that can be generated from the lease of the property[1]. This would result from annual rental income, net of property taxes, maintenance and repair costs, and reasonable administrative costs. In Ontario, particularly in the context of modern family structures, remissions are often used in second marriages where the deceased wishes to care for their second spouse without prejudice to the inheritance of children from a previous relationship. One of the typical scenarios is that a deceased leaves the use of the family home to his or her surviving spouse, with the house ultimately being handed over to the children when the surviving spouse dies or lets the estate live. [1] If the property consists of a condo with rent limitations, the relevant cash flows may instead reflect the rental costs that are avoided when comparable real estate does not need to be rented. For example, the beneficiary can only have «the right to occupy property under certain conditions» (i.e., to maintain the property in good condition). This is called the right of residence and it is much more restrictive than a life interest. For example, a right of residence does not allow the beneficiary to rent the property or use it for other benefits. As a general rule, the right of residence lapses as soon as the person to whom this right has been granted no longer lives on the property or does not fulfil other conditions, resulting in forfeiture.

In the event that the tenant of life wishes to dispose of a property, he can not do so without the agreement of all the beneficiaries (or their agents) who are entitled to full ownership of the property (the absolute beneficiaries). With respect to land, court approval is required for any decision. The application for approval must safeguard the interests of the absolute beneficiaries of the property. In this regard, the interest of life acts as a trust on the property of the tenant of life in favor of the absolute beneficiaries. If you create a life rate agreement, you want to make sure that you are giving someone an advantage and not a burden. If you`re considering adding a living rate clause in your will, it`s worth thinking about the running costs of maintaining and maintaining real estate and considering those costs in some way. In today`s world, however, it is not uncommon for a parent to remarry later in life, either after a divorce or after the death of a spouse. In many situations, the remarried parent may want to give their second spouse a «life interest» in the property, so that the new spouse can live or use other property until death.

The second spouse becomes a living tenant in the property. After his death, the property will often fall back into the estate of the deceased. The number of years included in the expected cash flows would be based on the expected residual life of the person holding the interest[2]. Historically, the children of a deceased parent become the beneficiaries of real estate that remains in the estate. The beneficiaries can either have the property transferred to their name, or the property can be sold immediately with the proceeds of the sale distributed to them. It is, of course, best not to leave the issue of financial interests related to the interests of life to the courts when planning your will. For example, if the gift is a home, any remaining mortgage will likely be relieved if your will contains the standard «pay my fair debts» clause. However, it is important that you make a fund available or that you make it clear who is responsible for paying property taxes, incidentals, maintenance, maintenance, and major repairs. . . .