Could a Life Estate Deed Help You Keep Your House Out of Probate?
For many older and retired Spokane-area residents, their home is their most important asset. It is therefore understandable they wish to make plans for disposing of their residence after they die. While you can certainly bequeath your home as part of your last will and testament, that means putting your house through probate. Generally establishing a Living Trust is the best way to transfer real property at death and avoid probate, but there are some less common options also. For instance, if you are looking for a way to leave your house to a family member or loved one while avoiding probate and cannot afford to establish a Living Trust, one option may be what is known as a life estate deed.
How Washington Life Estate Deeds Work
As the name implies, a life estate deed is a type of deed used to record ownership of real property. There are essentially three parties to a life estate deed: the grantor, the life tenant, and the remainder beneficiary.
The grantor is the person who executes the life estate deed. The life tenant is the person who holds the life estate in the property. And the remainder beneficiary is the person who will own the property after the life tenant dies. In most cases, the grantor and the life tenant are the same person.
Here is a simple hypothetical example. Carolyn is a retiree living alone in Spokane. She owns her house outright. She wants her son Joseph to inherit the property when she dies. But she wants to be able to live in the home and does not want the house to go through probate.
Carolyn therefore signs a life estate deed. She is the grantor. She is also the life tenant. This means that Carolyn may continue to live in the house during her lifetime. Joseph is the remainder beneficiary. Once Carolyn dies, ownership of the house automatically passes to Joseph without the need for probate.
What Are the Benefits (and Drawbacks) of a Life Estate Deed?
The primary benefits of this type of planning are ease of use and probate avoidance.
There are some significant pitfalls however. For instance, life estate deeds can be a real problem if the Grantor needs Medicaid. Medicaid can recover against the value of the property for the value of the life estate immediately prior to death. Accordingly, this type of planning will not protect a home from Medicaid Estate Recovery life an Irrevocable Trust might.
Another drawback is that a life estate deed restricts the grantor’s ability to sell or otherwise dispose of their home during their lifetime. In general, a life tenant has no legal authority to sell or mortgage the property. And the life tenant is still generally responsible for paying any property taxes or expenses related to the upkeep of the house. And the property may still be vulnerable to claims from the creditors of the grantor or even the remainder beneficiaries.
Contact a Probate Avoidance Attorney Today
As with any estate planning decision, you should always consult with an experienced probate avoidance lawyer before executing a life estate deed or any other non-probate transfer of your property, such as a revocable living trust. Contact Moulton Law Offices, P.S., today to schedule a free consultation. We serve clients throughout the Spokane Valley, Kennewick, and Yakima area.
