A life estate deed is a tool that can help with estate planning. With a life estate deed, people deed real estate to another party, but reserve a life estate, which means they have the legal right to occupy the property until death. Upon death, the property passes to the beneficiaries.
Life estate deeds can offer a number of advantages to people in different situations. First, the property does not have to go through probate – instead, the property passes automatically to the beneficiaries at death. Also, the property receives something called a “stepped up basis” when it passes to the beneficiaries, meaning that when they sell it, they would typically pay less in capital gains tax than if the property had been gifted to them during the life of the property owner.
There may also be some reasons to do a life estate deed if you hope to qualify for Medicaid in order to pay a nursing home. In order to qualify for Medicaid to pay for nursing home care, there are limits to the amount of assets you can own. A life estate deed may be one way in which to get property out of your name in order to qualify. However, these rules are very complex, and you should consult with a New York Elder Law Attorney before attempting any property transfers on your own.
Although there are some great reasons to do a life estate deed, it’s not appropriate for everyone. If you anticipate the property will be sold prior to death, it may not make sense to do a life estate deed.
If you think you may be interested in a life estate deed or in learning more about it, call the Estate Attorneys at Friedman & Ranzenhofer at 716-542-5444. Our attorneys have experience in both real estate and elder law, and we are happy to help you with your questions. Call us today.