Here's an actual case that came into our office recently (the names have been changed to protect the innocent). But, we all know that we all will die someday. Unfortunately, none of us know when we, or our loved ones, will die. The real property will automatically transfer to the remainderman without the ability to change the remainderman or protect the remainderman from creditors. More importantly, from the estate planning perspective, the life tenant has given up all control over what happens to the property in the event of the death or disability of the remainderman, or if the remainderman is embroiled in a divorce or other creditor problem when the life tenant dies. After the life estate deed is signed and recorded, the life tenant is no longer able to transfer, sell or mortgage the property without the joinder of the remainderman. The problem with life estate deeds is that the person transferring ownership loses control of the property when the deed is signed, despite the retention of the life estate. The same treatment applies to assets that pass by way of beneficiary designations or joint ownership of property with the right of survivorship. Transferring real property through a life estate deed also means the specific parcel of real property is not controlled by the life tenant's will or trust, so probate is avoided. Title to the specific parcel of real property passes, by operation of law, to the remainderman without probate and free of all claims of creditors of the life tenant (but subject to any legally enforceable lien on the property, such as a mortgage, home equity loan, or tax lien). All that is needed to perfect title in the remainderman is the recording in the public record of the death certificate of the life tenant. Ownership of the property transfers automatically upon the life tenant's death. Typically, the purpose of a life estate deed is to provide for the transfer of the property to the desired person(s) (remainderman) automatically at the death of the property owner who retained the life estate ("life tenant"), without the necessity of probate. What is the Purpose of a Life Estate Deed? A life estate is the right to occupy and use the property, or the benefits of the property, during one's life time. Unfortunately, when someone uses a life estate deed, they lose control over the distribution of their property when things turn out differently than expected.Ī life estate deed is a transfer of the ownership of the real property that is the subject of the deed to one or more persons (the "remainderman"), while retaining ownership of a life estate in the property by the person(s) transferring the property (the "life tenant"). Many individuals use life estate deeds in an effort to avoid probate and eliminate the need to hire an attorney to prepare a last will and testament, or a trust.
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