There are several estate planning tricks and tools that can keep some or most of your assets away from the probate court. One common means of addressing real estate is to create a new type of deed for your holdings. Life estate designations can help owners not only avoid probate, but may protect their largest asset from being taken by Medicaid. To find out more, read on.
Real Estate Deeds and Probate
In many cases, a property deed will contain the name of the deceased. Upon an owner's passing, the property is deposed of using either the will or the succession rules of the state. More and more owners are crafting deed designations that allow a home or other real estate to go directly to someone else. For example, if you are a single homeowner and your estate will pass to your adult child upon your death, the home must first pass through probate before they can take ownership. Probate involves not just legal fees, but time. It can take several months for the probate court to release the property to the beneficiaries.
How Life Estate Deeds are Different
With a life estate deed, the name of the adult child could be added to the deed using special wording. A life estate allows the owner, known as the life tenant, the right to reside at the property until they pass away. Anyone named on the deed other than the life tenant, known as the remainderman, owns the home as soon as their name is added but have no rights to take over ownership of the home. As long as the life tenant lives, they have ownership of the home, but they also have limited powers on what happens to the home. For example, the life tenant can only sell the home with the agreement of the remainderman.
Medicaid and Life Estates
The funds to cover the cost of nursing-home care for those who are eligible for Medicare are provided by the companion government agency, Medicaid. Unfortunately, Medicaid has the right to seek recovery of the money spent on a nursing home resident after they pass away. They do so by becoming a creditor who is owed money. Probate is a way to ensure that creditors are paid what the deceased owes them and Medicaid can often seize the entire estate. Since a life estate keeps the home out of probate, there may be some protection against its loss. However, some states allow Medicaid to recover property that is not included in probate.
Since the way life estate deeds are used varies from state to state, it's important to find out what could happen to your home after you pass away. Speak to an estate planning law firm (such as Skeen Law Offices) and learn more.