When ownership of real property needs to be changed, it is conducted with a document known as a life estate deed. The property owner has the deed drawn up sand then signs it so that the property will pass onto the designated person following death. The designated individual for the property is known as the remainderman. The life estate of the deed allows the owner to continue owning and using the property as they feel necessary up to the day they die.
The deed is designed to allow the owner to become the permanent tenant and must be filed with the county as soon as the owner signs it.
Life Estate Advantages to be Aware of
The life estate deed provides many advantages, such as the following:
- A home to enjoy still – The owner will remain in the home to live for the rest of her life.
- Relief – The owner will feel relieved that the home will be taken care of after they pass away.
- A will is not necessary – The deed takes the place of the will so it can be avoided
- Probate can be avoided – There is no need for probate as the deed takes care of any legalities once signed.
- Gift tax can be avoided – Under normal circumstances there will not be any need to pay a gift tax.
Life Estate Disadvantages to be Aware of
Besides the advantages, there are a few disadvantages to be aware of.prior to having a life estate deed signed. Below are a few.
- No Complete Control – While the owner is able to remain in the home, they no longer have the ability to have a mortgage taken out or be able to sell it. If the remainder happens to die prior to the owner, the remainder`s heirs will take over as remainder.
- Taxes on the Property Continue – The owner is still responsible to pay the taxes on the property.
- Transfer is irreversible – Property can only be reversed if the remainder agrees to the transfer.
Alternatives To The Life Estate Deed
Besides the life estate deed, there are other alternatives available such as the below:
- Will and Testament – This can include the life estate deed and the remainder being the heirs.
- Property Can Be Sold – The owner can have the property sold to children. The parent may be allowed to remain in the home with the money from the sale to help with her healthcare needs.
- Living Trust that is Revocable – This allows the heirs to be the beneficiary of the trust. The heirs then have the home distributed to them once the owner dies. Probate is still avoided and the owner is able to make changes at any time.
With a life estate deed, you are able to take care of a property and have peace of mind knowing that it will be taken care of by your heir. If you want to obtain more information about the process, then you need to get a hold of us today.