At least once a month, I take a phone call from someone wanting to know if they should put their child (or other family member) on the deed to their home. Usually, it is because they want to make sure the house does not go through probate. Click here to read about what probate is and click here to read about how to avoid probate. Sometimes, however, individuals are concerned that a nursing home (or some other creditor) will take their home.
First of all, let me set your mind at ease. If you live in Florida, the nursing home cannot take your house. Creditors cannot take your house. Your homestead is protected from creditors (including the nursing home) by our Florida Constitution. So, no one is taking your home (except, maybe the mortgage company if you do not pay your mortgage).
That being said, if your concern is to avoid the expense and hassle of probate, what are your options? You could add your child to the deed on your house, although, I really strongly recommend against that in most cases. Why? Because if your child is not living in the home, then it is not their homestead. If it is not their homestead, and your child has creditors, the creditors (including a spouse in a divorce) can come after their interest in your house. Additionally, adding your child on title to your house could cause you to lose some of your homestead tax exemptions. Another reason it is not a good idea to add your child on the deed to your property is because this is considered a gift which could cause your child or beneficiary to lose the step up in basis they would have received had they inherited the property, and for Medicaid purposes, this is a gift that would disqualify you should you need to apply for nursing home Medicaid benefits in the five years after transferring the property.
So what are your other options? You could consider doing an enhanced life estate deed. An enhanced life estate deed allows you to own the property until you die (but you still retain the right to sell, mortgage, rent, the property). At your death, if you still own the property, then it transfers to the persons you name in the deed. Your beneficiaries just have to record your death certificate when you die, and the property transfers into their names. Also, your beneficiaries still get the step-up in basis and this is not considered a gift for Medicaid purposes, so you will not be disqualified from applying for nursing home Medicaid.
The downside to the enhanced life estate deed is that, although the deed states that the “life estate” holder can sell or mortgage this property without the consent of the “remainderman,” these provisions may not be upheld by mortgage underwriters or title companies, and their signatures and consent may still be required, depending upon the wishes of the real estate company, title company, underwriter, bank, new owner, or whomever. Secondly, if the remainderman dies before the life tenant, a probate will be required unless the remainder interest is held with two or more people, as joint tenants with rights of survivorship (then only property would belong to the surviving remainder person(s). Thirdly, if a judgment is recorded against the remainderman, and the life tenant reconveys the remainder interest to another party, the judgment may have to be paid off first (especially if is an IRS lien). Finally, if the life tenant changes their mind about who the remainder person should be, the life tenant will need the remainder person to consent to change who is on the deed.
Another option, if you are concerned about your house avoiding probate and you want to control how it is left to your beneficiaries, is to create a revocable living trust and transfer your property into the trust. If you want to control things “from the grave”, this will certainly accomplish that goal. A revocable trust would also give you the ability to mandate that, if one beneficiary wants the house but the others do not, the beneficiary has the option to buy out the interest of the other beneficiaries. If you have a child (or other beneficiary) who cannot handle owning the house or other property without guidance (maybe the child is fiscally irresponsible, has drug or alcohol issues, or is disabled), a trust would allow you to control how the house (or other assets) are distributed.
Would you like additional guidance from a knowledgable attorney? Schedule a complimentary phone consultation with Attorney Laurie Ohall by calling 813.438.8503 or online.