As you build your Estate Plan, you are undoubtedly interested in the possibilities that may be advantageous to you under your particular circumstances. You may wonder what possibilities exist outside your standard Will or Trust-Based Estate Plan that is unique or unconventional.
It is usual to desire to find the finest possibilities for yourself, especially if you own a substantial amount of assets, including property. One thing to consider is an Enhanced Life Estate Deed as one possibility.
What is an Enhanced Life Estate Deed?
Enhanced Life Estate Deeds, also called Ladybird Deeds, are Quitclaim Deeds that allow you to transfer property during your lifetime to facilitate a smooth transition after you pass away. Using an Enhanced Life Estate Deed, you may assist your beneficiary in avoiding the time-consuming and costly procedure of probate court following your death. Parents can use the Enhanced Life Estate Deed to transfer their property to their children, enabling the child to avoid probate court and have the title changed to their name upon the parent’s death.
How do enhanced life estate deeds work?
An Enhanced Life Estate Deed effectively transfers the property during the original owner’s lifetime. The legally enforceable deed separates the property’s ownership into lifetime and future interests, allowing the beneficiaries to skip probate court. During their lives, the owner maintains ownership (this includes allowing them to mortgage and sell the property without consulting the beneficiaries). However, once they die, the property is transferred to the beneficiary.
What use does an Enhanced Life Estate Deed serve?
The primary objective of an Enhanced Life Estate Deed is to circumvent the probate process. Transferring property ownership through probate court is costly and requires obtaining and submitting various legal paperwork and waiting for a court ruling to transfer “clear title.” After receiving the court order, the county recorder’s office must issue a new deed in the beneficiary’s/name. This procedure often takes many months to finish.
Which states accept life estate deeds with enhanced provisions?
Not all states provide their people with Enhanced Life Estate Deeds. Only five states presently offer this choice to their residents: Florida, Michigan, Texas, Vermont, and West Virginia. You should consider drafting an Enhanced Life Estate Deed if you are a resident of one of the states mentioned above.
The Pros and Cons of Enhanced Life Estate Deeds?
A thorough understanding of the benefits and drawbacks of an Enhanced Life Estate Deed is essential before deciding.
Advantages
Bypass Probate Court – One of the most notable benefits of an Enhanced Life Estate Deed is that it permits your beneficiary to avoid the whole probate court procedure. This will save time, money, and effort, given that the probate court is costly and time-consuming. Your remaining assets will not be used to pay expensive probate court fees, allowing your loved ones to inherit more.
Medicaid Planning – Enhanced life estate deeds well serve those who have received Medicaid benefits. Typically, as your house goes through probate, the state will file for Medicaid Recovery, which might lead to the state claiming your property. Nevertheless, if you have an Enhanced Life Estate Deed, you may be assured that your house will be shielded from Medicaid Recovery.
Low Cost – Compared to the creation of a Living Trust, an Enhanced Life Estate Deed is a more affordable alternative. This will save you money that you may give as a legacy to your loved ones.
Disadvantages
Not Easily Adaptly- The Enhanced Life Estate Deed is often less adaptable to unanticipated events or desired future changes than other estate planning options. Changing the remaining beneficiary might be challenging, for instance, if the remainder beneficiary dies before the life tenant.
In addition, terminating the Enhanced Life Deed can be time-consuming if the life tenant changes their mind.
Not Widely Accepted – Since Enhanced Life Estate Deeds are uncommon in the United States and only recognized by a few states, it may be hard for the banks involved with your mortgage to fully comprehend what they are since they may not have worked with them often. The resulting scenario can be frustrating for both parties.
Choosing how to transfer the ownership of your home to your loved ones can be a time-consuming process, as you will need to carefully consider your options. If this option is available to you, it is worth exploring.