Life estate deeds are a widely used estate planning tool in Florida. They allow homeowners to seamlessly transfer property to heirs while avoiding probate.
These deeds can simplify the inheritance process, but they also raise important questions when it comes to selling the property: Can the property be sold? And if so, who has to agree to the sale?
Here’s what Florida life estate holders, future interest holders (i.e., the remaindermen), and real estate professionals should understand about selling property that is subject to a life estate deed.
What Is a Life Estate Deed?
A life estate deed is a legal tool that divides ownership of a property into two parts:
- Life Tenant: The person who has the legal right to occupy and use the property for the rest of their life.
- Remainderman (or Remaindermen): The person or people who automatically become the full owners of the property after the life tenant passes away.
This makes it so that the property avoids probate and transfers directly to the remaindermen once the life tenant passes. However, depending on the specific type of life estate deed, the life tenant has limited rights when it comes to selling or transferring the property.
Two Main Types of Life Estate Deeds in Florida
There are two primary types of life estate deeds in Florida:
- Traditional Life Estate Deed: The life tenant must get the consent of all remaindermen to sell, refinance, or transfer the title to the property.
- Enhanced Life Estate Deed (a/k/a Lady Bird Deed): With an enhanced life estate deed in Florida, The life tenant retains full control and may sell or transfer the property during their lifetime without involving the remaindermen.
Understanding which type of deed is in place is essential before proceeding with a sale.
Selling a Home with a Traditional Life Estate Deed
If the property is held under a traditional life estate deed, selling it requires the cooperation of all parties involved.
This means that:
- The life tenant does not have the authority to sell the property alone.
- All remaindermen must agree to and sign off on the sale.
- The proceeds from the sale are typically split based on what the parties agree to, or based on a formula that considers the life tenant’s age and life expectancy.
If any remainderman objects or cannot be located, then the sale won’t be able to go through.
Working with a Florida title company and attorney experienced in life estate transactions can help ensure a smoother process and reduce the likelihood of surprises at closing.
Selling a Home with an Enhanced Life Estate Deed (Lady Bird Deed)
If the property is subject to an enhanced life estate deed, also known as a Lady Bird Deed, the process is much more straightforward. In this case:
- The life tenant retains full authority over the property.
- The life tenant can sell, mortgage, lease, or otherwise transfer the property without the consent or involvement of the remaindermen.
This increased flexibility makes Lady Bird deeds particularly attractive for those who want to avoid probate but maintain control over their property.
What Remaindermen Should Know
If you’re named as a remainderman in a life estate deed, your role and rights depend on the type of deed in place. For traditional life estate deeds:
- You have a legal interest in the property during the life tenant’s lifetime.
- You must consent to any sale of the property.
- You may be entitled to a portion of the sale proceeds, depending on your ownership share.
As a remainderman, you should:
- Understand your legal rights.
- Request a copy of the deed and review it with a real estate attorney.
- Document your interest to avoid future disputes.
Being proactive can help protect your rights, especially if a sale is proposed.
Selling a Home with a Life Estate Deed: Tax Implications
Selling a home that is subject to a life estate deed can have tax implications. Consider the following:
- Capital Gains Taxes: If the property is sold during the life tenant’s lifetime under a traditional deed, both the life tenant and remaindermen may owe capital gains taxes based on their respective ownership interests. It’s best to discuss this possible tax with your accountant.
- Step-Up in Basis: If the property is not sold and instead transfers upon death, the remaindermen may benefit from a step-up in basis, reducing future capital gains taxes. This is another matter that is important to discuss with your accountant.
Tax issues are complex. It’s a good idea to consult both a real estate attorney and a tax advisor when making decisions about selling a property under a life estate deed.
Direct Comparison: Traditional vs. Enhanced Life Estate Deeds
| Feature | Traditional Life Estate | Enhanced Life Estate (Lady Bird) |
| Requires Remainderman Consent | Yes | No |
| Avoids Probate | Yes | Yes |
| Life Tenant Control | Limited | Full |
| Easier Sale Process | No | Yes |
| Step-Up in Basis | Possibly, if not sold | Possibly, if not sold |
Final Thoughts: Navigating Life Estate Deed Sales
Life estate deeds can be powerful estate planning tools, but they come with limitations that can affect the ability to sell the property. The type of deed determines whether the life tenant can act independently or must involve the remaindermen.
Whether you’re a life tenant considering selling your home or a remainderman concerned about your rights, it’s essential to fully understand the implications of the deed and work with professionals who can guide you through the process.
At Marina Title, our experienced Florida-based team helps property owners, beneficiaries, and real estate professionals handle title issues with confidence. We’ll guide you through your transaction, whether you’re looking to set up a life estate or sell under a traditional or enhanced life estate deed.
Call us today at 1-855-513-5880 or send us a message via our Secure Contact Form to learn more about our real estate and title services for buyers, sellers, and investors. We provide title, escrow, and closing services throughout the State of Florida.
