Life Estate Deeds - Avoid Probate
Although the probate process in Maryland is not as complicated as it is in other states, some people still want to implement estate planning techniques which avoid probate administration for certain assets upon their death.
One such technique is the creation of a life estate deed. A life estate deed, with full powers, is a deed executed by the property owner whereby he or she transfers a life estate interest in the property themselves, and provides that upon his or her death, title to the property vests in another individual or individuals (referred to as the ìremaindermanî). Since a person or persons have been designated to receive title to the property upon the death of the owner there is no need for the property to be administered through probate, provided however, that the remainderman and if applicable their heirs, are alive at the time of the property ownerís death, so that there are living individuals who can take title to the property.
Considerations relative to the preparation of a life estate deed with full powers are that an Attorney should be retained to prepare the Deed, and a fee (currently $60.00) is required to be paid to the County where the property is located to record the Deed in the Land Records. There are other issues which should be considered as well prior to executing a life estate deed. First, it is important that if several remainderman are named, that they will cooperate and participate with one another to pay any mortgage on the property, as well as taxes and expenses for repairs and maintenance upon the death of the property owner. For example, if no agreement can be reached between the property owners relative to the payment of the mortgage on the property and no payment is made, the property could be foreclosed upon.
Another consideration is what type of ownership should be conveyed to the remainderman. That is, should they be designated to hold the property as joint tenants, with the right of survivorship, which means that upon the death of one joint tenant the other joint tenant gets full title to the property. Or, a less desirable option, is for the remainderman to be designated as tenants in common, which means that if one of the remainderman predeceases the property owner that deceased remaindermanís interest would pass to their heirs, which could include minor children, or a sister-in-law who is difficult to get along with, and such titling also makes it difficult to obtain title insurance on real property.
This article has addressed the creation of a life estate deed with full powers, whereby the property owner is designated as the life tenant. If the property owner is contemplating naming another individual as the life tenant, the property owner can not revoke the conveyance without the consent of the life tenant named, which complicates matters.
It is evident that if you are contemplating the creation of a life estate deed, you should consult with an attorney to assist you in addressing the issues inherent in such a transfer.
Prepared by Valerie A. Rocco, August, 2017