By Attorney Laura Curry

(Attorney Laura Curry)

For many people, their home is one of their largest assets and also the most difficult to convey to a beneficiary without it going through the court probate process at the time of your death. The two main ways to have your house avoid going through probate are having it titled in the name of your Living Trust or a life estate deed.

A Living Trust is designed to allow for the easy transfer of the trust creator’s assets while bypassing the complex and expensive process of probate. A Living Trust agreement designates a trustee- usually the trust creator- who holds legal possession of the assets and property that flow into the trust. Any real estate that the trust creator owns can and should be re-titled into the name of the trust, so it bypasses probate upon the trust creator’s death. This is especially important if the trust creator owns real estate out of state. By titling the additional real estate into the name of the trust, probate can be avoided in multiple states.

A life estate deed is another option that would allow the house to bypass probate. A life estate deed is a type of deed. You give yourself a life estate interest in your home and retain the right to live in, use, and enjoy the property during your lifetime. Then, you name a beneficiary who will receive the property upon your death without having to go through the probate process. The person who retains the life estate is called the life tenant, and the person who receives the property after the life tenant dies is called the remainderman. This remainderman automatically inherits the property and remains on the deed at your death. You may name more than one person to receive the property but you must be careful how you designate their ownership, either as tenants in common or as joint tenants.

There are two different types of life estate deeds used in Maryland. The first is called a life estate deed with full powers. This type of deed is often used in the estate planning context. The purpose of a life estate deed with full powers is to avoid probate. Retaining full powers allows you, the life tenant, the power to sell, mortgage, or reconvey the property to someone else without notifying the remainderman. You retain all the same powers that you had before creating the life estate deed with full powers. The consent of the remainderman is not needed if you want to change the deed. 

The second type of a life estate deed is a life estate deed without powers and is often used in conjunction with Medicaid planning. The life estate deed without powers requires the consent of the remainderman if you want to sell, mortgage, or reconvey the property. For Medicaid purposes, this type of deed is considered a gift and the gift penalty rules apply. The advantage of this type of deed is that after five years the gift penalty period for Medicaid expires and the value of the life estate is not currently considered a countable asset for Medicaid purposes.
Creating a Living Trust or a life estate deed to avoid probate with your house has advantages and disadvantages depending on your situation. It is not a one-size-fits-all approach and you must carefully consider the legal consequences of changing the title of your home.

Please reach out to the attorneys at Sinclair Prosser Gasior to get started on your estate plan today.

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