Understanding the Florida Life Estate Deed
Understanding the Florida Life Estate Deed
When it comes to estate planning, it is important to consider each and every option for protecting your legacy. One of the best legal instruments available to Florida residents is the Life Estate Deed, a special type of deed that allows you to have greater flexibility and control over the future of your estate. This type of deed also allows you to avoid the probate process. Learn how this deed works and how Marina Title can help you incorporate it into your estate plan.
The Basics and Benefits of a Life Estate Deed
Also known as a Beneficiary Deed or Transfer on Death (TOD) Deed, a Life Estate Deed allows for the automatic transfer of your property to one or more persons, called remaindermen, upon your death. The deed creates what is known as a “life estate,” in which you continue to possess and use the property as a “life tenant” for as long as you live. There are many benefits to this arrangement:
- Probate Avoidance – The subject property of the deed can pass from you to your remaindermen without the need for probate.
- Peace of Mind – Once the Life Estate Deed is signed and recorded in the public records, there is no need for any other instrument to transfer the property to the designated remainderman.
- Medicaid Asset Protection – Transfers by a Life Estate Deed do not count for the purposes of determining Medicaid eligibility, and the property cannot be recovered by the state after your death.
- Tax Savings – With a Life Estate Deed, federal tax law treats the property as though it was held until your death. Thus, it may qualify for a stepped-up basis that eliminates any appreciation that accrued, providing possible income tax benefits to your heirs if they later decide to sell the property.
- Saving Legal Fees – Unlike a living trust, which has similar benefits, a Life Estate Deed tends to be less expensive to prepare while more effective in many respects.
- Keeping the Homestead Exemption – Since the Life Estate Deed does not transfer the property until your death, its execution does not impact your current exemption – thus, the asset protection benefits of Florida homestead laws remain.
The main drawback to the Life Estate Deed is that once it is executed, you only have the right to live on the property: you cannot mortgage, lease, rent, or sell the property unless you obtain the consent of the remaindermen (i.e., the future interest holder).
Life Estate Deed vs Enhanced Life Estate Deed
Also known as a Lady Bird Deed, the Enhanced Life Estate Deed is a special type of deed recognized only in Florida and a few other states (including Michigan and Texas). As the name suggests, it is an improvement over the common Life Estate Deed in one key way: the life estate holder maintains complete control over the subject property during their lifetime. Therefore, the life estate holder can mortgage, lease, rent, or sell the property without needing the consent of the remaindermen named in the deed. This is in addition to all the benefits of a Life Estate Deed mentioned above.
Hire a Qualified Expert
Like any estate planning tool, the Florida Life Estate Deed and Enhanced Life Estate Deed should be prepared with the help of an attorney to ensure that the conveyance is done correctly and is legally binding. The attorneys at Marina Title specialize in a broad range of real estate and title services, including advising clients on the best strategies for handling and taking title to their real estate. To learn more, and for a free consultation, call (305) 901-5628 or email [email protected].
