Category: Deed

What is an enhanced life estate?

What’s an Enhanced Life Estate?

What’s an enhanced life estate? This topic comes up from time to time with older couples of retirement age. First Coast News’ recent article entitled “Deed named for former first lady could be key to planning your estate” explains that a strategy that’s available in Florida and a few other states is called an enhanced life estate or a “Lady Bird” deed, named after former First Lady, Lady Bird Johnson.

This deed states that when I die, you get the property, but until then, I reserve all rights to do whatever I want with it. That contrasts with a traditional life estate where a property owner can plan for one or more others to inherit their house.

Typically, the person with a life estate has a lot less control over what happens in the future, including potentially being thwarted by the very person you’re tapping to receive your property at your death, in case you decide you no longer want the house while you’re still alive.

The problem is, now you want to sell the property, but since they are a co-owner, they can refuse. And there’s nothing you can do about it.

Enhanced life estates are also about protecting property and its eventual recipient from creditors after the death of the owner. That’s the benefit of avoiding probate. Medicaid or any other creditor may become a creditor in probate.

A Lady Bird deed supersedes a will.

But there are downsides to the Lady Bird deed. A big drawback is if you change your mind. You have to now record another deed in the public record to remove that, and every deed that you record creates one thing that could go wrong.

However, this can be true of any change made in hope of overriding an earlier estate decision, and Lady Bird deeds are fairly straightforward. Understanding what an enhanced life estate does will help avoid any pitfalls.  Ask an experienced estate planning attorney if this type of arrangement is available in your state.

If you would like to read more about enhanced life estates, or other types of deeds for property, please visit our previous posts.

Reference: First Coast News (July 19, 2021) “Deed named for former first lady could be key to planning your estate”

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Unrecorded deeds hurt estate planning

Unrecorded Deeds hurt Estate Planning

Using an unrecorded deed to transfer property without probate sounds like an easy way to transfer ownership of the family home, but is it asking for trouble in your estate planning? That’s the topic of an article from NWI Times entitled, “Estate Planning: Are unrecorded deeds a good idea?” The fact that the idea came from a family’s attorney makes the question even more important. The attorney told the parents the children could record the deed after their deaths and transfer the property without probate. Most estate planning attorneys haven’t seen this technique used in a long time, and some may never have heard of it. There’s probably a good reason for this—it’s an estate mess waiting to happen. Unrecorded deeds hurt estate planning.

First of all, what if the deed itself goes missing? One of the most common questions estate planning attorneys hear is “What do I do because Mom lost the_____?” Fill in the blanks—the deed, the title to the car, the bank statement, etc. Important documents often get lost. If a deed is missing and can’t be recorded, title can’t be transferred. Hoping an unrecorded deed doesn’t get lost could be devastating to your estate planning.

Until the unrecord deed is processed, and title transferred, the holders of the title still own the property. They can mortgage the property or sell it. The plan for the children to receive and record the deed may not have legal authority.

Laws about how deeds must be created change. Indiana made a change to the law in 2020 that required signatures on deeds to be witnessed. Without the witness, the deeds can’t be recorded. If the adult child is holding a deed for the recording and it’s not witnessed because the parents have died, it can’t be recorded.

There are better ways to transfer ownership of the family home than an unrecorded deed, that adhere to the general principles of estate planning.

There are also different types of deeds that are more commonly used in estate planning to transfer home ownership without going through probate. One is a Transfer on Death Deed (TOD Deeds). A TOD deed allows a person to name beneficiaries on their real estate property without giving up any rights of ownership. The TOD deed is recorded, so there’s no worry about mom or pop losing the paperwork.  The TOD deed can also be changed by recording another deed or using an affidavit.

Trusts can also be used to transfer home ownership and keep the transaction out of probate. Do not wait. Unrecorded deeds can hurt your estate planning. An estate planning attorney will be able to explain the different types of trusts used to transfer a home. State laws vary, and allowable trusts vary, so talking with a local estate planning attorney is the best option.

If you are interested in learning more about handling property in your planning, please visit our previous posts. 

Reference: NWI Times (May23, 2021) “Estate Planning: Are unrecorded deeds a good idea?”

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take care when transferring house to children

Selling a Home after the Death of a Parent

The first thing you’ll need to know about selling a home after the death of a parent, is how your parents held title, or owned, the home, begins the recent article “Home ownership after the death of a spouse” from nwi.com. In most cases, the home is owned by a couple as “joint tenants with rights of survivorship” or as “tenants by the entirety.” The latter is less common.

Tenancy by the entirety is a form of ownership available only to married people in a limited number of states and offers several advantages to the owners. It creates an ownership interest where the spouses own property jointly and not as individuals. It also creates the rights of survivorship, so that the surviving spouse owns the property by law when the first spouse dies.

Joint tenancy with rights of survivorship is similar to tenants by the entirety, in that they both convey rights of survivorship. However, joint tenancy does not treat the owners as a single unit. If you own entireties property with a spouse, you may not transfer your interest without your spouse’s permission because you own it as a unit.

In joint tenants, if one of the tenants want to transfer their interest in the property, he or she may do so at any time—and do not need the permission of the other tenant. This has led to some sticky situations, which is why tenants by the entirety is preferred in many situations.

If your parents own their home as tenants by the entireties or as joint tenants with rights of survivorship, the surviving spouse owns the home as a matter of law, and legally, ownership begins at the moment that first spouse dies.

Different states record this change of ownership differently, so you’ll need to speak with an estate planning attorney in your community (or the state where your parents lived, if it was different than where you live).

To notify the recorder’s office of the death, some state laws require the submission of a surviving spouse affidavit, which puts the recorder and the community on notice that one of the owners has died and the survivor now owns the home individually. Here again, an estate planning attorney will know the laws that apply in your situation.

There was a time when people recorded a death certificate, but this does not occur often. The affidavit makes a number of recitals that are important, and the recorded document proves the change of title.

In most cases, there is no need for a new deed, since the surviving spouse owns the property at the time of death, and the affidavit itself demonstrates proof of the transfer of title in lieu of a deed. If you are selling a home after the death of a parent, be sure to know how the home was deeded and what steps you will need to take. If you would like to learn more about probate and managing property after the death of a loved one, please visit our previous posts. 

Reference: nwi.com (March 14, 2021) “Home ownership after the death of a spouse”

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Information in our blogs is very general in nature and should not be acted upon without first consulting with an attorney. Please feel free to contact The Wiewel Law Firm to schedule a complimentary consultation.
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