Nebraska Farm Lease Payments & Deathby Frank Heinisch, Christin Lovegrove on 10/22/15
The cases on life estate termination with farm leases is an interesting chase. I was inspired to read further when I found Beacom overruled. Bottom line, look to when the cash rent is due. Cash rent due before date of death is in the estate of the life tenant. Cash rent due after death is owned by the remainderman. It appears the crop share is due the life tenant estate. Read the following case excerpts.
I believe you will find the cash rent is income in respect of a decedent with no step up in basis.
Frank C. Heinisch
Heinisch and Lovegrove Law Office PC LLO
Beacom v. Daley 164 Neb. 120, 81 N.W.2d 907 (1957)
Since the mother died on June 22, 1952, the question arises, was appellant liable for rent for the year 1952? Death of the mother (life tenant) terminated her interest immediately and thereupon appellant became entitled to the possession of the real estate. Guthmann v. Vallery, supra. As stated in Guthmann v. Vallery, supra: "On the termination of the life estate the reversioner became at once entitled to the possession of the real estate; * * *."
The rent for 1952 was not due until March 1, 1953. As stated in 33 Am.Jur., Life Estates, Remainders, Etc., § 308, p. 813: "The right to rentals continues only until his death and no longer, if he is a life tenant for the duration of his own life." And in 31 C.J.S., Estates, § 65b, p. 81: "On the termination of a life estate, rights claimed through the life tenant cease and the remainderman is entitled to possession."
As stated in Johnson v. Siedel, 178 Iowa 244, 159 N.W. 677, 678: "The authorities seem to hold that, without a special provision in the lease or by statute, rents are not apportioned in respect to time, so that the person who owns the reversion on the date the rent becomes due, is entitled to the entire rental matured that day. 1 Tiffany on Landlord and Tenant, § 176; 2 McAdam on Landlord and Tenant [4th Ed.], § 291; 24 Cyc. 1185; Russell v. Fabyan, 28 N.H. 543, 61 Am.Dec. 629." See, also, 33 Am.Jur., Life Estates, Remainders, Etc., § 309, p. 813, § 310, p. 816, § 311, p. 816. As stated in 33 Am.Jur., Life Estates, Remainders, Etc., § 309, p. 813: "The general rule followed in the absence of contrary statute and in the absence of an intention in favor of apportionment appearing from the will or other instrument under consideration is that income consisting of rent money is not apportionable as between persons successively entitled, where the right of one person ends and that of another begins during a rent period."
And in 33 Am.Jur., Life Estates, Remainders, Etc., § 310, p. 816, it is stated: "If the estate of the life tenant terminates intermediate rent days, or before any rent has become due, the accruing rent becomes an incident of and is annexed to the estate of the reversioner. Whoever owns the reversion when the rent falls due is entitled to receive the whole sum, unless it is otherwise provided by contract or statute."
We think, in view of the above principles, that appellant was not liable for rents for the year 1952.
Ruwe's Estate v. Ruwe, 211 N.W.2d 610, 190 Neb 663 (Neb. 1973),
Defendant also questions the requirement that he pay rent for the March
1, 1969, to March 1, 1970, year [190 Neb. 666] as the life tenant died on January 20, 1970, and defendant was the remainderman. His contention is based upon the theory that the rent did not accrue until March 1, 1970, after the termination of the life tenancy. In support of his theory he cites Beacom v. Daley, Supra. That case holds that rents accruing after the death of the life tenant belong to the remainderman. There was no evidence to show when the rent accrued and it was therefore deemed to fall due when the lease period terminated. In the present case the uncontradicted evidence shows that cash rent would be payable in advance and that crop-share rents fell due when the crops were harvested which was prior to December 1, 1969. The rent had already accrued to the life tenant prior to her death. It was personal property and as such belonged to the executrix of the estate of the life tenant. This court held in In re Estate of Mischke, 136 Neb. 875, 287 N.W. 760: 'Where a tenant for life of farm land leases the land, with the rent payable in a share of the crop, and dies while the crop is growing, title to the share of the crop reserved as rent passes to the executor of the tenant for life as assets of that estate.' The decision is based on the well-founded theory that growing crops are personal property. It is in line with holdings generally in other jurisdictions. See Annotation, 47 A.L.R.3d 801.
The rule announced in Beacom v. Daley, Supra, is frequently unsuited for application to rentals of agricultural
Heinold v. Siecke, 257 Neb. 413, 598 N.W.2d 58 (Neb. 1999),
LaVerne Heinold also argues that In re Estate of Mischke, supra [136 Neb. 875, 287 N.W. 760 (1939)], was overruled by Beacom v. Daley, 164 Neb. 120, 81 N.W.2d 907 (1957), which held that rents accruing after the death of the life tenant belong to the remainderman. This argument ignores our statement in Estate of Ruwe v. Ruwe, 190 Neb. 663, 666, 211 N.W.2d 610, 613 (1973), that "[t]he rule announced in Beacom v. Daley, supra, is frequently unsuited for application to rentals of agricultural lands, and insofar as it may conflict with In re Estate of Mischke, supra, it is overruled."
LaVerne Heinold further contends that the warranty deed creating the
598 N.W.2d 64
life estate represents an intent on the part of the life tenants for their rights to the crops to terminate upon death. LaVerne Heinold correctly states that a life estate terminates on the date of death of the life tenant. See In re Estate of Glaser, supra. He further notes that the language in the deed reserves to the grantors " 'the full benefit and use of the above described premises and the rents, issues and profits therefrom for and during their natural lives.' " Brief for appellant at 2. LaVerne Heinold contends that such language indicates that upon the completion of the natural lives of the grantors, their reservation [257 Neb. 420] of "the rents, issues and profits" thereby was intended to immediately terminate, thus leaving the growing crops to the remainderman.
Although this court has not addressed the issue, other courts have held that certain language in the creating instrument can cut off the right of emblements. For example, inWilhoit v. Salmon, 146 Cal. 444, 445, 80 P. 705 (1905), the owner of land granted a deed conveying it in fee " 'together with all and singular the tenements, hereditaments and appurtenances thereunto belonging, or in anywise appertaining, and the reversion and reversions, remainder and remainders, rents, issues and profits thereof.' " The deed was deposited in escrow, to be delivered upon the death of the grantor. The court held that such deed postponed only the possession of the premises by the grantees until the grantor's death and that upon the life tenant's death, her estate had no right to emblements. Similarly, in Williams v. Stander, 143 Colo. 469, 471, 354 P.2d 492, 494 (1960), an agreement providing that "upon the decease of First Party, all of the rents, profits and all income whatsoever from said land, shall, thereupon, become the exclusive property of Second Parties or the survivor of them" was found to abrogate any right the estate had to emblements. The language in the warranty deed applicable to the present facts contains no similar language, and, assuming without deciding that certain language in the creating instrument can cut off the life tenant's right to emblements, the deed before us here does not demonstrate an intention on the part of the grantors to relinquish such right.
Lastly, LaVerne Heinold contends that the Nebraska Principal and Income Act, Neb.Rev.Stat. §§ 30-3101 to 30-3115 (Reissue 1995), applies to the present facts and that under such act, the income from the growing crops properly belongs to the remainderman. The act provides that it governs "the ascertainment of income and principal and the apportionment of receipts and expenditures in trusts and decedents' estates, to the extent not inconsistent with the provisions of a creating instrument." § 30-3101. As the county court correctly held, the act does not apply to the present facts. The "creating instrument" at issue here is the warranty deed creating the life estate, and it is those [257 Neb. 421]provisions of law pertaining to this type of estate that apply, not those applicable to decedents' estates and trusts.
Because the corn and soybean crops at issue were planted during the existence of Adolph Heinold's life estate and harvested after his death, the doctrine of emblements requires that the proceeds of his reserved share of the crops be treated as property of his estate. The judgment of the county court therefore is affirmed.