Should you consider a life estate deed?
People typically consider a life estate deed because they like the idea of avoiding probate and/or they believe there is a chance that they might need to apply for Medicaid-covered long-term care in the future. But is a life estate deed really a form of estate planning? Or is it something less? Be careful when considering a life estate.
Does a last will override a life estate deed?
When a person dies, beneficiaries might learn that the decedent made a deed that conflicts with the specific wording in his will. Generally, a deed will override the will. However, which legal document prevails also depends on state property laws and whether the state has adopted the Uniform Probate Code.
Can you place a lien on a life estate deed?
The deed includes a provision stating that the parents “retain the right to use and occupy the property during their lifetimes,” a so-called “life estate” in the property. Upon the death of the parents, the life estate ceases to exist and the children own the property free and clear of any lien for long-term care costs.
Does a life estate have to be recorded?
life estate can be granted or reserved by deed, created by will, or by any other written instrument. While no particular language is required to create a life estate, any language in a recorded instrument that reserves in the land a lifetime interest, right, or privilege (estate) for the
What are the disadvantages of a life estate?
Drawbacks to Life EstatesRestricts the ability to finance the property;Subject to attachment of donee for their creditors, divorces, death or bankruptcy;Donee cannot be changed later;All parties must agree to sell the property;More items...•
Does South Carolina recognize a life estate deed?
A property owner can reserve a life estate and grant a remainder interest giving the remainderman possession when the owner dies—allowing the property to bypass probate. South Carolina does not recognize transfer-on-death (TOD) deeds.
Who owns the property in a life estate?
A person with life interest generally (as we have not perused the Will) does not have the right to sell, transfer or alienate the property to the detriment of the absolute owner, which in your case is the son, i.e., you. It is a limited right to enjoy the property up to the death of the life holder.
What basic property right is not available to the holder of a life estate?
An interest in land that lasts only for the life of the holder. Thus, the holder of a life estate cannot leave the land to anyone in their will, because their interest in the land does not survive the person.
Does South Carolina allow a transfer-on-death deed?
South Carolina does not allow real estate to be transferred with transfer-on-death deeds.
Is South Carolina a right of survivorship state?
Married couples in South Carolina most commonly own property together as joint tenants with rights of survivorship. The advantage is that when one spouse dies, the surviving spouse automatically takes ownership of the property without it being subject to probate.
What is the point of a life estate?
A life estate helps avoid the probate process upon the life tenant's death. The property will automatically transfer to the remainderman, making the process simple and easy – a will isn't needed for the transfer to happen.
Can a nursing home take a life estate?
If you are later admitted to a nursing home and receive Medicaid benefits, the Medicaid office will place a lien on the life estate for the value of services rendered. This lien is released upon your death leaving 100% of the property to the remaindermen.
Can you evict a life tenant?
During your lifetime, you can choose to sign your tenancy over to someone who would inherit it if you died. The legal process for this is called assignment. The correct process must be followed. If it's not, you could still be held responsible for paying the rent and the new tenant could be evicted.
What is a life tenant entitled to?
A life tenant is entitled to the income of a fund, but not capital. The entitlement usually continues for life, but can be for a shorter period. For example a widow may have a life interest in her late husband's estate, until she remarries. On the death of a life tenant, the trust fund may vest in another beneficiary.
Does a life estate end when the measuring life dies?
A life estate is an interest in land whose duration is measured by a human life. The holder has the right to possess the property as long as he or she lives. At the death of the holder, the property reverts back to the owner.
How do I remove someone from my life estate?
If you have created a life estate and are looking to remove someone from it, you cannot do so without consent from all parties – unless you have a clause or document known as a power of appointment. These powers may be written within the deed or attached to it.
Can a life estate be transferred?
A life estate deed permits the property owner to have full use of their property until their death, at which point the ownership of the property is...
What is a warranty deed reserving life estate?
This life estate deed is a document that transfers ownership of real property, while reserving access and use of the property for the duration of t...
What is the purpose of a life estate deed?
A life estate deed permits the property owner to have full use of their property until their death, at which point the ownership of the property is...
What is a life estate warranty deed?
This life estate deed is a document that transfers ownership of real property, while reserving access and use of the property for the duration of t...
What is a reserved life estate?
Reservation of the present interest allows the owner to retain ownership for a period of time measured by the life of one or more individuals, by a...
Is a transfer on death deed the same as a life estate?
A transfer on death deed allows you to retain full ownership during your lifetime and conveys your full interest to the Grantee upon your death.Ult...
Does South Carolina have a transfer on death deed?
South Carolina does not allow real estate to be transferred with transfer-on-death deeds.
Does a warranty deed mean you own the property?
A warranty deed guarantees that: The grantor is the rightful owner of the property and has the legal right to transfer the title.The title would wi...
Can a life estate be changed?
Can a life estate deed be changed? It is challenging to modify or change a life estate deed. The grantor cannot change the life estate as he or she...
How Life Estate Deeds Work
To understand how Life Estate Deeds work, it is important to make a distinction between ownership and possession. You can possess something without...
How to Create A Life Estate Deed
The creation of a Life Estate Deed can be tricky. It is important to include the right language to create the life tenant relationship. If multiple...
Comparison to Other Deed Forms
A Life Estate Deed is not the only way to transfer property at death. Property will automatically transfer to the surviving owner at death if it is...
Ways to Structure A Life Estate Deed
There are several ways to structure a life estate deed. You could, for example, create a life estate in which the life tenant’s interest is based o...
Common Uses of Life Estate Deeds
There are several reasons why people want to transfer property to someone else at death while, at the same time, keeping rights to use the property...
Alternatives to Life Estate Deeds
Life Estate Deeds give the remainder beneficiaries immediate ownership of the property. Although that ownership is not possessory until the life te...
What is life estate deed?
A life estate deed permits the property owner to have full use of their property until their death, at which point the ownership of the property is automatically transferred to the beneficiary.In the right situations, it can be a streamlined and easy way to transfer ownership.
What is warranty deed reserving life estate?
What is a warranty deed reserving life estate? This life estate deed is a document that transfers ownership of real property, while reserving access and use of the property for the duration of the grantor's life. It allows the original owner (grantor) to remain on the premises with full access to and benefits from the property.
Can you transfer real estate in South Carolina?
South Carolina does not allow real estate to be transferred with transfer-on-death deeds.
Can a life estate deed be changed?
Can a life estate deed be changed? It is challenging to modify or change a life estate deed. The grantor cannot change the life estate as he or she has no power to do so after creating the life estate deed unless all of the future tenants agree. It requires the permission or consent of every one of the beneficiaries.
What is a life estate deed?
Life estate deeds are designed to transfer the property at death without losing the ability to use the property during life. As discussed in How to Avoid Probate of Real Estate, a life estate deed is a popular estate planning tool. Life estate deeds are the oldest form of deed for avoiding probate at death and are well-established in most states.
How does a life estate deed work?
Life estate deeds work by dividing the property into two types of interests. One interest is measured based on the owner’s lifetime and is called a life estate. The interest that passes at the owner’s death is called a remainder or remainder interest. The life estate and remainder interest are then transferred to different owners. There are three categories of owners:
What is co-ownership in real estate?
With these forms of co-ownership, the owners have simultaneous possessory rights. Each owner can occupy or use the property at the same time. A life estate deed is also a form of co-ownership. Both the life tenant and the remainder beneficiary have real interests in the property.
What is the life tenant's duty?
The life tenant also owes duties to preserve the property for the benefit of the remainder beneficiaries and must take their interests into account in making decisions. Many people would prefer to avoid probate at death without sacrificing control during life.
What is a TOD deed?
TOD Deed – A TOD deed (also called a beneficiary deed or transfer-on-death deed) allows the owner to name a beneficiary on the deed , similar to naming a beneficiary on a life insurance policy or bank account.
What are the two types of life estate deeds?
Note: As discussed below, there are two types of life estate deeds: Traditional life estate deeds and lady bird deeds, also called enhanced life estate deeds. This article focuses primarily on traditional life estate deeds. See our discussion of lady bird deeds for more information about enhanced life estate (lady bird) deeds.
Do life estate deeds forfeit control?
Life estate deeds are most often used in states that do not offer lady bird deeds or TOD deeds .
What is a life estate deed?
The short answer is a life estate deed separates ownership of real property between two different parties. Often, but not always, the parties are the parents or one parent, and a child or more than one child, and sometimes grandchildren.
How long does it take to live in a home when a parent buys a life estate?
When a parent buys a life estate interest in a child’s home there is a one year from date of purchase requirement for the senior to actually live in the home and the parent must also pay the fair market value for the life estate as established by DHHS life expectancy regulations.
What are the drawbacks of a non-probate estate?
There can be draw backs when the bulk of a person’s estate passes to non-probate beneficiaries as in the case of a remainderman of a life estate. One problem is lack of liquidity to pay decedent’s debts which can force the sale of other probate assets.
What is a Lady Bird Deed?
Some states allow something called the enhanced life estate deed or Lady Bird Deed, named in honor of First Lady, Lady Bird Johnson. The Lady Bird Deed not only has transfer on death provisions built in but allows the life tenant to sell the property without notifying the remaindermen, (which normally is not allowed) and if the life tenant does not sell before he or she passes then the house or real property will go directly to the named remaindermen without going through probate. South Carolina does not recognize the Lady Bird Deed. Texas, Ohio, Florida and Kansas and several other states now accept this form of conveyance.
What happens if a remainderman dies before the donor?
A second problem can occur if a named remainderman dies before the donor. The donor or life-tenant could have created unintended beneficiaries, resulting in assets passing outside the family to an in-law. Additionally, there could be minor or incompetent beneficiaries as remaindermen that require court approval to sell.
Can a life estate be used for Medicaid?
One party gets life time use of the property and the other receives the property immediately at death of the life tenant effectively bypassing probate. Life estates can be effective planning tools for several purposes including Medicaid. However there are strict Medicaid rules for transferring any assets or interests.
What is a life estate deed?
This form is a Life Estate Deed from two Grantors, individuals or husband and wife, to an individual Grantee. Grantors convey and grant to Grantee a life estate in the described property. This deed complies with all state statutory laws.
What happens to a life estate after someone dies?
What happens to a life estate after someone dies? Upon the life tenant's death, the property passes to the remainder owner outside of probate.They can sell the property or move into and claim it as their primary residence (homestead). Property taxes will not be reassessed.
What is a life tenant?
Life Tenant the beneficiary entitled to receive lifetime benefits from a Trust. Remainderman the beneficiary who will receive trust assets after the Life Tenant has died. Right of Occupation a right to live in a property for a specified time, or for the beneficiary's lifetime, but usually subject to conditions.
When does the remainderman's interest vest in a life estate?
With a life estate deed, the remainderman's ownership interest vests when the deed is signed and delivered (or recorded in the public record). Accordingly, the children's ownership interest in the property vested upon their father signing the deed and recording it in the public records, or the year 2000.
Can a person own property in a life estate?
A person owns property in a life estate only throughout their lifetime. Beneficiaries cannot sell property in a life estate before the beneficiary's death. One benefit of a life estate is that property can pass when the life tenant dies without being part of the tenant's estate.
What are the benefits of a life estate deed?
There are many benefits to creating a life estate deed, sometimes called a life estate trust: Avoid probate. Mom gets to pass her property to Son without its having to go through probate. When she dies, he becomes the owner without a court proceeding. No will necessary.
How to achieve the same outcome as a life estate deed?
There are other ways to achieve the same outcome as a life estate deed: Revocable trust. Mom can place the property in a revocable living trust with Son as the trust beneficiary. By doing so, Mom transfers ownership of the home to the trust, yet she can continue to live there the rest of her life. Mom can set up the trust to distribute ...
What happens to a son's property after his death?
Loss of control. While Mom gets to live ion the property for the rest of her life, she can't sell it to anyone, take out a mortgage, or control what happens to it after her death. If Son dies before Mom does, his heirs become the remainderman in his place. This might not be what Mom intended, yet she has no control over it.
Can you gift a life estate deed to your son?
Avoid gift tax. Using a life estate property deed can be preferable to an outright gift from Mom to Son during Mom's life, because that could be subject to gift tax. A place to live. A life estate deed is often used to provide housing for someone until they die.
Does Stepdad have a life estate?
Mom might own a home in her own name and create a life estate deed that gives her much younger husband (Stepdad) a life estate in the property so Mom can be assured he will always have a place to live. She can leave the remainder to Son, so he will get his inheritance once Stepdad dies.
Does a mom have to include a will?
Mom doesn't have to include the property in a will. She signs the deed and it's done. Emotional relief. Mom signs the deed and knows that she doesn't have to worry about what is going to happen to the property after her death. Avoid gift tax.
Who signs a deed to a property?
The person who owns the real property (in this example, Mom) signs a deed that will pass the ownership of the property automatically upon her death to someone else, known as the "remainderman" (in this example, Son). As part of the deed, Mom keeps what is called a life estate, which means she can continue to live on and use the property for ...
Who is the owner of a life estate?
Life Estates establish two different categories of property owners: the Life Tenant Owner and the Remainder Owner. The Life Tenant Owner maintains the absolute and exclusive right to use the property during his or her lifetime. This can be a sole owner or joint Life Tenants.
How long does it take for a life estate to be protected from Medicaid?
Property owned via a Life Estate is typically protected from Medicaid claims once 60 months have elapsed after the date of transfer into the Life Estate. After that five-year period, the property is protected against Medicaid liens to pay for end-of-life care.
Why do people use life estates?
Life Estates are used to avoid probate, maximize tax benefits and protect the real property from potential long-term care expenses you may incur in your later years. Transferring property into a Life Estate avoids some of the disadvantages of making an outright gift of property to your heirs.
What is a life tenant?
Life Tenant (s) maintain responsibility for property taxes, insurance and maintenance. Life Tenant (s) are also entitled to rent out the property and to receive all income generated by the property. Remainder Owner (s) automatically take legal ownership of the property immediately upon the death of the last Life Tenant.
Does life estates avoid probate?
Life Estates avoid probate; the property automatically transfers to your heirs upon the death of the last surviving Life Tenant. Transferring title following your death is a simple, quick process. Life Tenant’s right to use and occupy property is protected; a Remainder Owner’s problems (financial or otherwise) do not affect ...
Who must sign a deed to sell a house?
In order to sell the property, all owners must agree and sign the Deed, including Life Tenants and Remainder Owners; Life Tenant’s lose the right of sole control over the property.
Do life tenants get taxed if they sell their home?
Potential income tax consequences if the property is sold while the Life Tenant is still alive; Life Tenants do not receive the full income tax exemption normally available when a personal residence is sold. Remainder Owners receive no such exemption, so any capital gains tax would likely be due from the Remainder Owner’s proportionate share of proceeds from the sale.
What is a deed of real estate?
Deeds of real estate to pass entire estate; conveyance of fee simple absolute; construction of conflicting language. (A) Every deed of real estate executed after December 31, 1993, passes to the grantee the entire interest of the grantor in the property described in the deed, unless provided to the contrary in the deed.
What is section 27-5-10?
SECTION 27-5-10. Tenure of lands in State.
Is a descent being cast in consequence of death of a person in possession of real property?
The right of a person to the possession of any real property shall not be impaired or affected by a descent being cast in consequence of the death of a person in possession of such property.
Can an estate in remainder be defeated?
No estate in remainder, whether vested or contingent, shall be defeated by any deed of feoffment with livery of seizin.
What is life estate?
The term “life estate” often comes up in discussions of estate and Medicaid planning, but what exactly does it mean? A life estate is a form of joint ownership that allows one person to remain in a house until his or her death, at which time it passes to the other owner, referred to as the person with the remainder interest. Life estates can be used to avoid probate while giving a house to children without losing the ability to live in the home, remaining responsible for property tax – with the benefit of homestead and age related tax exemptions, remaining responsible for homeowner insurance, yet creating ownership in the children at the death of the parent. This type of deed can play an important role in Medicaid planning since Medicaid does not assign any value to a life estate when the parent applies for Medicaid to pay for nursing home care. If the transfer occurred prior to five years before application, there will be no penalty for the transfer.
Who holds the life estate?
The person holding the life estate — the life tenant — possesses the property during his or her life. The other owner — the remainderman — has a current ownership interest but cannot take possession until the death of the life estate holder. The life tenant has full control of the property during his or her lifetime and has ...
How long does it take to get Medicaid after transferring property?
Be aware that transferring your property and retaining a life estate can trigger a Medicaid ineligibility period if Medicaid application is made within five years of the transfer. Further, purchasing a life estate should not result in a transfer penalty if you buy a life estate in someone else’s home, pay an appropriate amount for ...
How long before a life estate can you transfer property?
If the transfer occurred prior to five years before application, there will be no penalty for the transfer. In a life estate, two or more people each have an ownership interest in a property, but for different periods of time.
Is a property in probate included in the estate?
Although the property will not be included in the probate estate, it will be included in the taxable estate. Depending on the size of the estate and the state’s estate tax threshold, the property may be subject to estate taxation.
Can a life estate be used to avoid probate?
Life estates can be used to avoid probate while giving a house to children without losing the ability to live in the home, remaining responsible for property tax – with the benefit of homestead and age related tax exemptions, remaining responsible for homeowner insurance, yet creating ownership in the children at the death of the parent.
Can a life tenant sell a house without the remaindermen's agreement?
The life tenant cannot sell or mortgage the property without the agreement of the remaindermen. If the property is sold, the proceeds are divided up between the life tenant and the remaindermen. The shares are determined based on the life tenant’s age at the time — the older the life tenant, the smaller his or her share and the larger the share of the remaindermen.
