Real Estate Council of Alberta Fundamentals Practice Exam

In a life estate arrangement, what happens upon the death of the life tenant?

1. The property is sold to the highest bidder

2. The interest reverts to fee simple ownership

3. The property is divided among heirs

4. The lease agreement is automatically renewed

The correct answer is: The interest reverts to fee simple ownership

In a life estate arrangement, once the life tenant passes away, the property does not become part of the deceased’s estate for the distribution among heirs. Instead, the property reverts back to the original grantor or their heirs in a fee simple ownership status. This means that the individual or entity who held the life estate has only a temporary interest in the property, which is limited to their lifetime. When they die, their rights to the property cease, and the property then returns to the person or party who originally granted the life estate or to their designated successors. This automatic reversion is a key feature of life estates, emphasizing the temporary nature of the life tenant’s interest. Other options involve alternative scenarios that are not applicable in a life estate context.