Written by: Nataline Garcia, Esq.
Many people come to me with the idea of creating a life estate deed to transfer their interest in their property. They believe it is a quick, affordable and effective way of protecting their interest in property. This article will explain the many foreseeable drawbacks in having a life estate deed prepared in place of other estate planning tools.
A life estate deed effectively gives property away during the owner’s lifetime. The owner of real estate makes a gift of real property to beneficiaries who are called remainder beneficiaries. During the owner’s lifetime he/she is entitled to the property, with limitations, however upon the owner’s death the property will transfer to the remainder beneficiaries. However, there are some caveats to a life estate deed, which in my opinion, do not make it the best estate planning tool.
- Limited Control of Property: Once a life estate deed is in effect, the owner cannot mortgage or sell the home without the consent and approval of the remainder beneficiaries. In essence, although the remainder beneficiaries have a future interest, they still legally have power over what is done with the property. In the event you wish to sell, mortgage, or refinance the remainder beneficiaries will need to consent. If they remainder beneficiaries do not agree, you may not be able to proceed with taking your desired actions with the property.
- Property May Still be Subject to Probate: A property transferred by a life estate deed would require probate if your remainder beneficiaries should predecease you.
- Property is Subject to Owner’s Creditors, Divorces, Death or Bankruptcy: A creditor’s lien can attach to a remainder interest, creating a cloud on the title for the life tenant. Similarly, the owner’s creditors may still be able to make a claim against the property after the owner of the life estate dies.
If you have considered having a list estate deed prepared, consider the above drawbacks prior to doing so and consult with an experienced attorney to see if this is the best path for your needs or if there is a better option to prepare for life’s unexpected contingencies. You can contact the Law Office of Ray Garcia, P.A., at 305-227-4030 or via email legal@raygarcialaw.com if you have any questions or wish to further discuss this matter.
Law Office of Ray Garcia, P.A.
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