Life Estate Deed For Automatic Transfers To Your Heirs
Sometimes we just want things to happen fast: instant coffee, internet download speeds, high speed rail. The need for speed even invades our estate planning. Heirs want their inheritance, and they want it now. The automatic transfer of assets to beneficiaries is easier to accomplish with tools like the Arizona life estate deed.
A typical deed transfers title of real property to a new owner. The property must be specifically identified, usually with a legal description, but at least in enough detail to know what property is being transferred. Deeds also contain information that identifies the grantee, the person or entity receiving the property. For example, if Joe wants to sell his property to Martha, he would have a deed prepared, signed, and recorded in the county where the property is located. Joe is the grantor, Martha is the grantee.
With a life estate deed, however, the property is conveyed from the owner to a life tenant and remainder men.
- The life tenant is often the grantor, but that’s not required. With the Joe-to-Martha transaction, Joe could do a life estate deed to Martha. Joe remains at the property until he passes away.
- The remainder men are the beneficiaries who receive the property upon the life tenant’s death. After Joe signs the life estate deed, Martha becomes the remainder man.
Advantages Of Life Estate Deeds
Speedy transfer! The remainder men take possession of the property without having to go through probate. The life tenant’s interest in the property ends at death, so the property never becomes part of his or her probate estate.
The life tenant gets to continue living at the property and still retains an ownership interest. The remainder men cannot sell the property. The beneficiary’s creditors cannot take the property from the life tenant, so the life tenant has some asset protection.
The life estate deed may help the life tenant qualify for Medicaid.
Are There Disadvantages?
Sure! The life estate can’t be changed without consent of the remainder men. This means the life tenant cannot sell all or part of the property if the beneficiaries will not allow it. The life tenant may feel relieved about this, while the remainder men may feel restricted.
The life tenant is still available for all mortgages, liens, expenses, maintenance costs, and taxes on the property.
The property remains in the life tenant’s estate for estate tax purposes. The beneficiaries receive a “step-up in basis” that may help them avoid capital gains taxes if they decide to sell.
Get The Big Picture
Is a life estate right for you? Find out by contacting the attorneys at Keystone Law Firm.
At Keystone Law, we help people with their legal questions every day. To schedule an appointment, call us at (480) 418-8448. We offer services for clients throughout Arizona, including Chandler, Gilbert, Sun Lakes, Tempe, Phoenix, Mesa, Scottsdale, and Apache Junction.