In the past, one of the most popular
methods for older clients who want to avoid probate and ensure their
property passes to their children was to use a quitclaim deed
conveying a life estate to the parent, with the remainder to the
child. This is referred to as a traditional life estate deed. The goal
was to ensure that on the death of the parents, the children would own
the home and not have to open a probate.
With that type of deed,
for IRS,
gift tax purposes there is an
outright gift of the remainder to the children at the time of
conveyance. An IRS gift tax return would also have to be
filed if the remainder interested was valued over
$12,000 (in 2009). The parents also give up control of the remainder interest in
their home upon transfer. This type of life estate deed
results in an immediate conveyance of the remainder and
constitutes a
disqualifying transfer for purposes of Medicaid nursing home
eligibility. In addition, if the parent wants to convey or mortgage
the property in the future, all remaindermen must sign the paperwork.
If there is an outstanding mortgage on the home at the time of
conveyance of the remainder, that conveyance is subject to State of
Florida Document stamps. Finally, if the child has creditor problems
problem or gets a divorce, the remainder interest could be attached. A
positive attribute of the traditional life estate deed is the parent’s
preserve the step-up in basis for the children,
Now, along comes the "Enhance Life Estate
Deed". The probate avoiding method of the new millineum! With this
type deed there are technical terms of legal art used whereby the
person conveying the interest retains an interest for life in the
property, and also retains the powers to sell, convey. lease,
mortgage, or do anything he/she desires with the property. Plus
the
need for probate is avoided.
With the enhanced life estate deed, probate is avoided because the
parent/person who did the original conveyance to the
child
retains all of the rights to do whatever they want with the property
while they are alive. This in legal jargon is called a "life
estate". The children, or other loved ones would be named as being
entitled to a future "remainder interest" when the person holding the life
estate dies. Upon the death of the parents the homestead passes free
and clear of the decedent’s creditors claims so long it is given to
surviving lineal descendants (blood relatives).
One must be careful when creating an
Enhanced Life Estate deed, or any other deed. Using the wrong
language, conveying to the wrong persons, or including or deleting
legal terms could result in unintended consequences. For instance, a
person cannot convey their homestead during lifetime if they have a
spouse or minor children. Such an attempt to convey would be voidable. Wording of the deed is important.
It is not something an office supply
store or internet form will properly achieve.
