How To Avoid Probate For Your Real Estate Property
Almost all of our clients at The Miller Elder Law Firm want to know how to pass assets, including property, to their children (or other beneficiaries) without the expense or delay that can happen with probate. In some cases we recommend an enhanced life estate deed which is available only in a few states and fortunately Florida is one of those states. Some know this planning tool as a Lady Bird Deed.
A Florida Enhanced Life Estate Deed can avoid probate for your real property, speed up the transfer of a property upon death, use the fair market value of the property at the time of death (lowers capital gains taxes upon sale), and maintain Medicaid eligibility.
How An Enhanced Life Estate Deed Works:
You deed your house back with all the rights of ownership (you can mortgage it, sell it, etc.) to yourself and upon your death or upon the death of you and your spouse, the property passes to your designated beneficiaries and does not pass through probate. The enhanced life estate deed is a way to transfer property to someone else outside of probate while retaining all the rights of ownership until you die. This gives you the power to retain control of the property during your life, including the right to use the property for profit or sell the property.
We find that the most cited reason for completing an enhanced life estate deed is to speed up the process of asset property transfer to the beneficiaries, mostly likely the children, so they may receive this gift immediately and without fees. If you do not pass your property this way, your estate and personal representative must pay the bills to maintain the home, inside and outside, continue homeowner’s fees, fund property taxes, and find an insurance company to cover an unoccupied dwelling until the probate process is nearly completed, which can sometimes take nine months to a year.
If the person creating the deed does not sell the property during his or her lifetime, the home will pass directly to the named beneficiaries after the death of the grantor. The real estate avoids going through probate just like any other deed that conveys ownership of real estate to another person without the danger of triggering adverse consequences. In order to sell the home, only the death certificate need be recorded to allow the title to transfer to the remaindermen.
An added value of using an enhanced life estate deed is that the execution of such a deed is not considered a transfer of ownership for purposes of applying for Medicaid benefits. Also, if the remaindermen are family members, the property will pass without being subject to the claims of your creditors (except a mortgage, of course.)
When Not To Use An Enhanced Life Estate Deed
Although it’s a good strategy for most people, there are some situations where an enhanced life estate deed is not recommended:
1. You have a mortgage on your property. Check with the mortgage company to obtain approval prior to completing an enhanced deed.
2. You are not sure who you want beneficiaries to be.
3. Your beneficiaries are minors.
One other word of caution in using an Enhanced Life Estate deed– should one of your named remaindermen die before you, you should do a deed making yourself whole again (this usually is done by use of a Special Warranty deed back to yourself) then a new Enhanced Life Estate deed can be created to convey the deceased remainderman’s interest.