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Estate planning involves making key decisions to protect your assets and ensure a smooth transition of property to your loved ones. One common tool used in Massachusetts is the life estate deed, which allows a person to transfer ownership of real estate while retaining the right to live on the property for the rest of their life.
At The Law Offices of Patricia Bloom-McDonald, we help individuals and families in Westport understand whether a life estate deed is right for their estate planning goals. In this blog, we’ll explore what a life estate deed is, how it works, and its primary advantages and disadvantages.
What Is a Life Estate Deed?
A life estate deed is a legal document that divides ownership of real property into two parts:
- The life tenant (typically the current owner) retains the right to live in and use the property during their lifetime.
- The remainderman (often a child or other beneficiary) automatically receives full ownership of the property upon the life tenant’s death, without the need for probate.
This setup allows property to pass directly to the remainderman, which can simplify the estate settlement process.
Pros of a Life Estate Deed
Avoids Probate
One of the most attractive features of a life estate deed is that it allows property to transfer outside of probate. This means the property is not tied up in court proceedings and can pass immediately to the remainderman upon the life tenant’s death.
Allows the Life Tenant to Stay in the Home
The life tenant maintains full rights to use and live in the home during their lifetime. They remain responsible for taxes, maintenance, and insurance, and cannot be removed by the remainderman.
Helps with Medicaid Planning
In Massachusetts, a properly executed life estate deed can be a valuable tool in long-term care planning. If created at least five years before applying for MassHealth (Medicaid), the home may not be counted as an available asset. This could help preserve the home while qualifying for nursing home care.
Medicaid Estate Recovery Risk
Although the home may be protected as an asset for Medicaid eligibility, Massachusetts’s Estate Recovery Program will not make a claim on the Medicaid recipients’s estate because the home passes directly to the remainderman after the life tenant’s death and the property passes outside of probate, —this is a nuanced issue that requires careful legal analysis.
Potential Tax Benefits for Heirs
When the remainderman inherits the property upon the life tenant’s death, they often receive a stepped-up basis for capital gains tax purposes.
Cons of a Life Estate Deed
Loss of Full Control
Once the deed is signed and recorded, the life tenant cannot sell, mortgage, or transfer the property without the consent of the remainderman. This loss of flexibility can be problematic if the life tenant later wants to downsize, refinance, or access equity.
Irrevocability
A life estate deed is generally irrevocable unless all parties agree to revoke it. If family circumstances change, such as the remainderman facing divorce, bankruptcy, or creditor issues, the property could be at risk. This is why it is important to make sure the Life Tenant files a Declaration of Homestead at the Registry of Deeds.
Is a Life Estate Deed Right for You?
Life estate deeds can be highly effective in achieving certain estate planning goals, but they are not one-size-fits-all solutions. Factors to consider include:
- Your age and health
- Whether you plan to remain in the home for life
- Your relationship with the intended remainderman
- Your Medicaid planning timeline
- Your comfort level with losing some control over the property
In some cases, alternatives such as a trust may be another option.
Talk to a Westport Estate Planning Attorney
If you’re considering a life estate deed in Westport, MA, consult with The Law Offices of Patricia Bloom-McDonald. We take a personalized approach to estate planning and will help you weigh your options so you can make an informed decision that reflects your long-term goals and family dynamics.
Protect your home and your legacy. Contact The Law Offices of Patricia Bloom-McDonald today to learn whether a life estate deed is right for you. We’re here to guide Westport residents through every step of the estate planning process with clarity and care.