Who Owns the Property in a Florida Life Estate?
Updated: Aug 13
Making critical decisions as to your estate is an essential part of planning for the future. It helps make the process easier for your beneficiaries, of course, but it also delivers exceptional peace of mind for you. Clarifying and documenting your wishes now allows you to get on with the important business of living. Now, you may be wondering about the Florida life estate statute and how that may play a role in your affairs. Let’s take a look.
The Florida Life Estate Statute
Life estate is a method of transferring property; a major benefit is that it occurs outside of the probate process. This in itself is a tremendous advantage as probate can be drawn out, not to mention emotionally wrought and even contentious for your beneficiaries.
With a life estate, you can split the ownership of real property between one or more “life tenants” and one or more “remaindermen.” We’ll clarify:
Life Tenant. This is one or more people to whom you will bequeath ownership of a property during their lifetimes. In other words, they have the right to live there rent-free until their death. They are responsible for maintaining the property and also owe a duty to avoid “wasting” the property. That is, they cannot intentionally destroy or damage it (e.g. by failing to maintain it properly). If the property produces income, they also have the right to that income during their lifetime. The life tenant cannot, however, sell, transfer, or leave the property in a will. This is why they are called a life tenant, and not an owner.
Remainderman. After the life tenant(s) passes, the remainderman becomes the full owner of the property. And again, because this happens outside of probate, they can assume ownership and occupancy, if they wish, without inconvenience, extraneous cost, or delay. Once the property is transferred to the remainderman, they can do anything they would be able to do had they purchased it outright.
Why would you do this? Well, you can create a life estate in order to remain in your home. You no longer “own” it - the remainderman does. That party, however, cannot occupy the property. Upon death, it can be fully passed to the remainderman (e.g. a child, a partner, a relative, etc.). Establishing a life estate can also be instrumental in Medicaid planning.
Life estates may also be used when the property owner names another party as a life tenant. They won’t occupy the property, but they do own it and will have full occupancy rights and freedom of ownership upon the life tenant’s death.
At this point, you may be wondering exactly who owns the property in a life estate? A life estate creates a sort of joint ownership. For example, if you want to live in your home and leave it to your daughter, you might make yourself a life tenant. You continue to live in your house, pay insurance and property taxes, and vacuum the carpets! But you don’t have full control over the house. If you want to make big changes or take out a mortgage, for instance, you’ll need approval from your remainderman (in our example, this is your daughter).
Also - and this is important - if you have a change of heart, you cannot revoke the life estate without consent from the remainderman. This is a decision that is certainly worth putting much time and thought into.
After death, your house title is passed on immediately to your daughter. All she has to do is file the death certificate, and she has full rights of ownership. She can live there, sell it, or leave it to an heir in her own will.
As you can see, there are major benefits, including an efficient transfer of ownership and avoidance of the length probate process. But there are risks: if you change your mind, you need for your remainderman to agree to revoke the life estate. In some cases, this can get messy.
Traditional Life Estate Deed vs. a Florida Enhanced Life Estate Deed
Life estates can be problematic: one big issue is if the remainderman passes away before the life tenant. Then the property would need to go through probate. If the owner has no will, then it will be passed down according to established rules of intestate succession (i.e. the probate court distributes it according to Florida law). In this case, your property may not be passed to the party or parties you wish. And, of course, a big issue for many is that they do not retain full control of the property.
This is where an enhanced life estate deed becomes important. You can add language that addresses these situations. For example, you can stipulate that you will be able to convey or mortgage the property without remainderman approval. This gives you a great deal more flexibility. Another example: you can address the concern of your remainderman dying before you through this type of enhanced deed.
Ladybird Deeds and Medicaid
In Florida, enhanced life estate deeds are also known as “ladybird deeds.” They are important if you need Medicaid. To qualify, you must pass a means and assets test. In short: if you have too many assets, you cannot receive the financial assistance you need for medical care and, if necessary, nursing home care.
Households over a certain value are counted; you can use a ladybird deed to transfer property (or even a portion) to a trust or individual. The remaining assets will then be distributed upon death.
Florida life estate statutes are complex, and there are a variety of considerations to keep in mind. It’s helpful to have the advice and guidance of a lawyer who specializes in estate planning, asset protection, and Medicaid planning. In planning your estate, you are taking control of your life and your death. Our goal is to ensure that your wishes are honored and upheld by the law.
Contact Elder Law today to learn more.