If you have a small estate, you can deed your house and still be able to live there until you pass away, and avoid probate.
If you have a simple estate, you might want to consider passing your house, using a Gift Deed and retaining a life estate. This type of deed conveys your house to a person or persons and reserves to you, the Grantor, the right to live in the house for the rest of your life. The ownership in the property is divided into two interests: a life estate and a remainder interest. The person who holds the life estate has the right to possess the property during his or her lifetime. The person who has the remainder interest has the right to possess the property after the life tenant passes away.
Example: John Smith, in consideration of the love that he has for his daughter, Laura, conveys his house to her as her sole and separate property reserving and excepting to John the right to all rents and profits on the property and the right to use the property for as long as John lives. At John’s death, the house passes to Laura simply by recording a Death Certificate, without having to go through probate.
If you want to use a deed retaining a life estate, there are a couple of things you should know. First, once your have deeded the property retaining a life estate, you can no longer sell the property without the signature of the person holding the remainder interest. For example, a woman deeded her home to her daughter and retained a life estate. Later, she had a falling out with her daughter. She wanted to sell her home and move, however, her daughter refused to sign the deed, so the woman was unable to sell her home. Second, if you deed your home and retain a life estate and later apply for Medicaid, your life estate interest may be counted as an asset towards eligibility for Medicaid.
A Gift Deed retaining a life estate is a way to transfer your property without going through probate and still retain the use of the property during your life time. Make sure you understand the risks before using this type of deed.
Tom Packer is an Elder Law Attorney serving all of Southeast Idaho. As part of his law practice, Tom offers Life Care Planning to deal with the challenges created by long-term illness, disability and incapacity. If you have a question about a Senior’s legal, financial or healthcare needs, please call us.