What is an Enhanced Life Estate Deed?

This deed allows you to continue to own the property in your own name during your lifetime, and to retain the ability to sell it or otherwise dispose of it, but providing for the automatic transfer to the remaindermen you named in the deed after your lifetime, or to their estates should they have predeceased you.

One thing you need to know is that lenders are uneasy dealing with properties in life estates.  Their logic is that if they loan you money after the property is in the life estate, they will have been put on notice that ownership will automatically transfer to a new owner upon your death and that the new owner might argue the lender knew this and therefore should not be able to collect on the balance due under the loan.  Therefore, if you ever decide to refinance the property, you may have to transfer it out of the life estate and back into fee simple ownership, complete the refinancing work, then do another deed to put it back into the life estate in order to avoid probate.

Also, after your death, some title insurance companies are not comfortable insuring title upon sale when a property has an enhanced life estate deed in its history.  Not all companies feel this way and there are usually ways to remedy the problem even for those who have issues, but you should be aware that the remaindermen on the deed may have to shop around to find a title insurer that will insure the title in the event of sale.

If you want to add a new remainderman or take away one you have already named, e.g. you named two people to own the property after your lifetime and want to change it so there will actually be three owners, or you want to change it to having only one, then you may need to do two deeds to accomplish this.  The first deed would be a transfer back to you in what is called fee simple ownership, with no remaindermen, then a new deed would be needed to create interests in the new set of remaindermen.  In some instances, in spite of the clear language of the deed allowing you to make such adjustments, title insurance companies will not insure the title on a parcel if the remaindermen have not joined in the transfer of the property.  This can cause significant delay and additional expense when trying to deal with the property.

To avoid deeding the property back and forth to yourself and also to avoid possible title insurance difficulties, you could create a revocable trust and put the property in the trust with a single deed that would be recorded in public records.  Then you can make as many changes as you want to who would receive the property upon final disposition via amendments to that trust without having to display to the whole world what those changes were.  However, the preparation of a trust and its associated documents is more expensive than the preparation of a single deed or even several deeds.  If you are relatively sure that your remaindermen are the people you want to own the house at your death, then the enhanced life estate deed is a simple, inexpensive way to make that happen.

It is important to meet with an experienced estate planning attorney to find out if an Enhanced Life Estate Deed is right for you.