Enhanced Life Estate Deeds (also known as LadyBird Deeds in Florida) have become increasingly popular. The following is an explanation of what it is.
If you think of the bundle of legal rights that constitutes ownership of real property under the laws of the State of Florida as a pie, lawyers can divide the pie into separate pieces, each of which entitles the holder of that piece to certain rights in the property. One common piece of the ownership pie is a “life estate.” A life estate is the right of a living person during his or her remaining natural life to enjoy certain benefits of the legal ownership of real property including the right to possession and the right to any income generated by the property. A key aspect of the life estate, however, is that it terminates instantly upon the death of the holder (life tenant).
So what happens to ownership when the life tenant dies? It vests in the holders of the reciprocal piece of the ownership pie called the “remainder.” At the time a life estate is created a remainder interest is also created. In basic terms, the holder of the remainder interest (the remainderman) becomes the sole owner of the property upon the death of the life tenant. No further deed or probate is required to achieve that result.
Therefore, a life estate deed can be used to transfer title to real estate without probate or more complex legal arrangements (such as a trust) upon death of the original owner. So, for instance, a parent could execute a deed in which the parent retains a life estate in the property and conveys a remainder to a child or children. A consequence of this, however, is that a remainder interest is a vested ownership. This means that if the parent later wanted to sell or mortgage the property, the child or children had to voluntarily join in that transaction. The parent, in effect, has given up control of the property.
This is where the “enhanced” life estate deed comes to the rescue. In an enhanced life estate deed, the lawyer puts language in which the creator of the life estate/remainder reserves the right to change his or her mind without the approval or joinder of the remainderman. In other words, in my example, the parent retains control over the property.
Enhanced life estate deeds have become a very useful tool in the lawyer’s estate planning toolbox to assist families in avoiding probate without the expense and complexity of revocable trusts. Enhanced life estate deeds have their limitations and still carry certain risks, and therefore, are not the best tool for everyone. In every estate planning consultation I do, I consider whether an enhanced life estate deed is beneficial to that particular client. If you have any questions about enhanced life estate deeds, please feel free to contact me.
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