A deed is a written instrument that transfers ownership of real property. A properly drafted deed can be a great probate avoidance tool. There are different types of deeds and different forms of ownership. Among them is a deed which reserves a life estate in the grantor or a life estate deed. Such a life estate deed may be a wonderful probate avoidance mechanism or an unwelcome liability, depending on the family dynamics and the extent of the available resources to maintain and preserve the property for the remainderman.

When it comes to life estate deeds, on the surface such deeds may indeed accomplish the original intent of a seamless conveyance of real property without the need for a legal proceeding.

However, before pursuing this option, it is important to realize all the consequences of going forward with such a probate avoidance tool. A life estate deed generally creates two types of ownership. There is the life estate owner and the remaindermen or those who will own the property upon the passing of the life estate owner.

Both of these sets of owners have rights and responsibilities with regard to the subject property.

Specifically, pursuant to the Florida Statutes, the life estate holder has several duties associated with his or her possession of a life estate. In particular, a life estate owner or a life tenant is obligated to:

  • Pay for ordinary expenses in connection with the management and preservation of the real property including the interest portion of the mortgage payments, ordinary repairs, property taxes, utilities as well as the cost of any proceeding that relates to the life tenant’s estate or use of the property;
  • Pay for the homeowner’s insurance; as well as to
  • Pay for expenses related to environmental matters which are attributable to the life tenant’s use of the property.

Section 738.801(2)(a) of the Florida Statutes (2014).

Ordinary repairs are generally those that are necessary to maintain the property in good repair and preserve it for the remainderman or future interest holder. A life tenant may not therefore commit waste by permanently diminishing or altering the value of the remainderman’s future estate.

The remaindermen also have responsibilities. In particular, they are responsible for:

  • Paying on the principal of a debt secured by the property;
  • Paying for a proceeding or any other matter that concerns primarily the title to the property, other than title to the tenant’s estate;
  • Paying for expenses related to environmental matters, apart from those attributable to the life tenant; as well as for
  • Paying for extraordinary repairs.

Section 738.801(2)(b) of the Florida Statutes (2014).

Furthermore, if either the life tenant or the remainderman incurs an expense for his or her own benefit without the consent or agreement of the other, he or she must pay such expense in full. Section 738.801(2)(c) of the Florida Statutes (2014).

Finally, the cost of any improvements or special taxes or assessments for such an improvement is generally the life tenant’s obligation if such an improvement is not reasonably expected to outlast the estate of the tenant. Should that not be the case, then such cost will be apportioned between the life tenant and the remainderman. Section 738.801(2)(d) of the Florida Statutes (2014).The aforementioned statutory apportionment of the expenses can always be modified by the parties themselves. However, in the absence of any agreement, the Florida Statutes would then control.

Issues often arise when a life tenant and a remainderman do not get along such as in a blended family setting. So what if a life tenant decides to sell the property? That would only be possible if the remainderman consents to such sale.

On the brighter side, a life tenant may rent out the property and keep the proceeds. However, that may jeopardize the homestead tax exemption, if the subject property is homestead property.

Now in cases where a life estate is created in the homestead property upon the passing of a spouse, the Florida Statute does offer a way out of such form of ownership.

Specifically, in lieu of a life estate, the surviving spouse may elect to take an undivided one-half interest in the homestead as a tenant in common, with the remaining undivided one-half interest vesting in the decedent’s descendants in being at the time of the decedent’s death, per stirpes. See Section 732.401(2) of the Florida Statutes (2014).

However, such an election must be made within 6 months after the decedent’s death and during the surviving spouse’s lifetime. Section 732.401(2)(b) of the Florida Statutes (2014).

Given the costs and restrictions that are imposed on a life tenant by a traditional life estate deed, there is a trend to instead opt for an enhanced life estate deed or a “lady bird deed”. With an enhanced life estate deed, the life tenant is free to dispose of the property without the consent of the remainderman.

However, the drafting of a deed, any deed, should be accomplished as part of an overall estate plan. Piecemeal approach to estate planning can prove to be disastrous. To ensure that your estate planning documents reflect your wishes, an attorney should be consulted and engaged for the drafting.