Posted By Larry on July 16, 2009
The traditional Life Estate Deed is an estate-planning tool with several benefits including allowing an individual to convey his/her homestead (real property which is designated as the owner’s primary residence and which is thus protected by law from creditors’ claims) to his/her intended beneficiaries upon his death, while avoiding the probate process. Also, when the individual dies, his/her beneficiaries take the property at a stepped-up basis (at the value of the property on the day of the individual’s death), so if the property is sold shortly after the individual’s death, there is no capital gains tax.
But when using the traditional Life Estate Deed, there are also problems, including that an individual retains only a life estate interest in his homestead; in other words, he cannot sell, encumber or otherwise transfer its ownership without the consent of his named beneficiaries. Also, the beneficiaries cannot claim the property as their own homestead, so it is vulnerable to their creditors’ claims (even while in the possession of the individual life tenant). Furthermore, the beneficiaries’ spouses may claim an interest in the property upon the beneficiaries’ death or in case of divorce.
The Florida Enhanced Life Estate Deed is an invaluable alternative that provides the benefits of the traditional Life Estate Deed and, furthermore, allows an individual to retain control of his/her homestead during his/her lifetime. As such, with the Florida Enhanced Life Estate Deed, an individual can bypass probate, possibly avoid capital gains tax when the property is sold, protect it from claims of the beneficiaries’ creditors during his/her lifetime (except federal tax liens), and, most importantly, retain the authority to sell, mortgage, convey, gift or cancel the remainder interest in the property at any time prior to his death. If there is a property interest left upon the individual’s death, the remainder will pass to the named beneficiaries.
Because few other states offer the privileges contained in the Florida Enhanced Life Estate Deed, it is advisable to employ an experienced Florida Real Estate Lawyer or estate planning lawyer when attempting to create a Florida Enhanced Life Estate Deed. Otherwise, you risk, among other things, losing homestead protection for your property, disqualification from Medicaid if you are later admitted to a nursing home, or surrendering your freedom to sell or otherwise encumber your property during your lifetime. Also, if your conveyance is deemed a “gift” in accordance with Federal tax law, the individual’s estate may be made to pay federal gift taxes.