Using an Enhanced Life Estate Deed to Avoid Probate

Written by: Attorney Scot B. Copeland

While there are a number of ways to transfer property upon death in Florida, an enhanced life estate deed (also known as a Lady Bird deed) is often an inexpensive and efficient way of doing so.  Absent a probate avoidance mechanism (such as ownership in a revocable living trust or joint survivorship ownership), if a person dies owning property, the property is subject to probate.  Probate is a court managed process of paying debts of deceased individuals and then transferring ownership of assets after death.  Depending on the circumstances, probate may last a few months or several years, and may become quite costly.  An enhanced life estate may be a powerful planning tool for: (1) meeting the objectives of a property owner; (2) protecting property from probate creditors; and (3) avoiding the expense and time of a probate.

In Florida, an enhanced life estate is a court created mechanism that is a variation of a standard life estate, with the key difference being that additional, enhanced powers are granted to the life tenant (the owner of the life estate).  In order to appreciate the aspects of an enhanced life estate, it is helpful to compare and contrast those of the standard life estate.

In a standard life estate, a property owner transfers property via a deed to a life tenant with a remainder interest to a remainderman. Such a transfer provides for the life tenant’s ownership and use of the property during his or her life. Via the deed, the remainderman receives an irrevocable remainder interest in the property that vests upon the death of the life tenant. The primary problem with a standard life estate is that, upon delivery of the deed, the remainderman’s interest is irrevocable, meaning decisions regarding selling, mortgaging, or disposing of the property require the consent of both the life tenant and remainderman. For example, if a life tenant wants to sell or mortgage the property, the life tenant is at the mercy of the remainderman who must consent.  Moreover, with a standard life estate, the following apply:

• The life tenant is liable to the remainderman for the maintenance of the property, so no waste or significant damage occurs.
• The life tenant is limited in allowing use of the property that will occur after his or her death.   
• The remainderman is responsible for extraordinary repairs and potentially additional expenses, despite having no viable interest at the time. 

An enhanced life estate is essentially a standard life estate that reserves enhanced powers to the life tenant during his or her life. An enhanced life estate permits the life tenant to retain unilateral control and flexibility over the property during his or her life. Thus, during the life tenant’s life, the remainderman is disregarded and has no rights to the property. With a properly drafted enhanced life estate deed, the life tenant retains the exclusive right to sell, mortgage, or dispose of the property during his or her lifetime, all without regard or consideration of the remainderman. As a result, an enhanced life estate is a powerful tool available to a landowner who wants to retain exclusive control of the property during his or her life, and automatically pass the property to others (such as family members) upon death. Once a deed containing a life estate or enhanced life estate is recorded in the county clerk’s office, all that is needed to establish a remainderman’s ownership is the recording of the life tenant’s death certificate.      

Since the enhanced life estate is a creation of Florida courts, the language and reservation of powers to the life tenant are key. Thus, the proper drafting of the deed is critical.  The deed should be crystal clear and unequivocal as to the powers reserved to the life tenant.  It is also recommended that the deed include language that specifically divests the remainderman of any powers during the life tenant’s life. 

A potential downside with an enhanced life estate is that some title insurers and/or mortgage lenders may require the remainderman to consent to transfers or mortgages of the property.  However, with a properly drafted deed, it is unlikely that this problem will occur.  If a title insurer or mortgage lender insists upon remainderman consent (which should be unlikely), the enhanced life estate provides the life tenant with the ability to transfer the property outright to him or her (without a life estate), and then later re-transfer the property back into the enhanced life estate. 

For further information and assistance with enhanced life estate deeds, please contact Scot B. Copeland or one of our other estate planning, trust, & probate attorneys.