Life Estate Deeds
LIFE ESTATE DEEDS, YOUR QUESTIONS ANSWERED
As attorneys, we receive a lot of questions on a daily basis. One of the topics we are asked about most frequently are life estate deeds.
Many people hear about these documents from the news, articles, or friends and wonder if it is something they need to add to their estate plan. Life estate deeds are very useful tools but there are some caveats.
Here are some of the questions we field most often which may help you in determining if you need to obtain a deed.
How does a life estate deed work?
Like a regular Warranty Deed or Quit Claim Deed, a life estate deed conveys your property from you as the Grantor to someone else as the Grantee. The difference is that a Life Estate Deed reserves a life estate for you.
What does “reserving a life estate” mean?
Reserving a life estate gives you the legal right to continue to use the property during your lifetime. You would continue to care for the property and pay property taxes while also being able to live on it, farm it, rent it, etc. Once you pass away, the legal ownership would automatically transfer to the Grantees upon recording of the death certificate.
Can I reserve a life estate for someone else?
You can! Perhaps you would like to give a spouse, a parent, or a child the ability to continue to live on the property or receive income from the property during their lifetime. Reserving a life estate for that person would allow that to occur.
What if I change my mind? Is a life estate deed revocable?
A life estate deed is not revocable—at least, not without the consent of all of the parties involved. As such, you want to be very careful with life estate deeds to ensure they meet your wishes for now and for the future.
Well, can I at least sell the property if I want?
You can sell your life estate interest but not the full interest in the property, unless all of the parties involved consent. Life Estate and Remainder Interest tables are used to determine the value of a life estate interest in a property based on the life estate owners’ age.
If you are young and own a life estate interest, your interest would be worth more as you are likely to live many more years. Similarly, if you are older, your interest would be worth less for the opposite reason.
Will a life estate deed protect me from creditors?
In some cases, yes. For example, perhaps when you are elderly, you need to go into a nursing home. Nursing homes are very expensive, and you might need Medicaid to help pay for your care. If five years had passed since you signed the life estate deed, that property would not be counted against you in your application to qualify for Medicaid.
Is a life estate deed protected against the Grantee(s)’ creditors?
Not necessarily. For example, perhaps you convey the property to your children, reserving a life estate for yourself, and one of your children has creditors such as Judgments against them. It is possible that a lien could be placed against the property for those debts.
Again, this is another reason why you want to be very careful in your use of life estate deeds—and who the Grantees are.
What about probate? Does a life estate deed avoid probate?
It does! Because the life estate is reserved only for your lifetime, once you pass away, legal ownership goes directly to the Grantees with no need to go through probate. Of course, some of your other assets may not be protected from probate and so if you are concerned about probate, it is important to discuss your full estate with a qualified estate planning attorney.
I have minerals, not land. Can I convey those in a life estate deed?
Absolutely! Your life estate interest will allow you to still sign oil and gas leases and receive the income and royalties from the minerals during your lifetime.
Are life estate deeds filed somewhere?
Life estate deeds—like other deeds—are recorded in the office of the proper county recorder. Recorded documents are public record and publicly accessible.
Sometimes clients are concerned about privacy—perhaps they are giving land or minerals to some children and not to others and do not want the excluded children to know. If this is the case for you, a life estate deed might not be the best option.
So, should I obtain a life estate deed?
If after the above discussion, you feel that a life estate deed might meet your needs and wishes for your estate plan, we would be happy to discuss further with you! Every person’s situation is unique and a life estate deed is only one part of an estate plan. By meeting with you and talking about your specific needs, we can advise you as to whether or not you should obtain a life estate deed.
Please give us a call at 701-852-5224 to discuss life estate deeds and other ways we can help prepare your estate plan.