If you own real estate in Maryland, it is important to consider and make informed decisions about these types of assets. A life estate deed can be a valuable tool to help you legally pass your real property assets to your heirs and avoid the probate process, while also preserving tax benefits. This type of deed may be used during the estate planning process or the Medicaid planning process. In this article, we will provide an overview of life estate deeds in Maryland and the primary benefits.
What is a Life Estate Deed?
A life estate deed can be used to allow individuals to protect their assets and ensure a smooth transfer of real estate property to their beneficiaries. The life estate deed grants a person the right to live in and use a property for the remainder of their life, with ownership transferring to another party upon their death. In Maryland, a life estate deed can be a beneficial legal instrument for several reasons. Here are a few of the reasons a life estate may be used as part of an effective estate planning strategy.
#1: Preserving Lifetime Use and Residence
One of the primary benefits of a life estate deed is that it allows individuals to retain the right to live in and use their property for the duration of their lifetime. This provides peace of mind and security allowing the person(s) to enjoy their home, reside in familiar surroundings, and maintain control over their living situation. The life tenant has the right to occupy and utilize the property without interference from the remainder beneficiaries.
#2: Avoiding Probate
In Maryland, utilizing a life estate deed can help avoid the probate process for the property covered by the deed. When a person passes away, assets that go through probate are subject to court supervision and may involve delays, expenses, and potential disputes. By establishing a life estate deed, the property passes directly to the remainder beneficiaries upon the life tenant’s death, which often allows families to avoid the probate process. This can result in a faster and more efficient transfer of property to the intended beneficiaries.
#3: Protection of Medicaid Eligibility
Long-term care costs, such as nursing home expenses, can quickly deplete an individual’s assets. However, by transferring a property through a life estate deed, it may be possible to protect the property from Medicaid estate recovery. In Maryland, if the life tenant requires nursing home care and qualifies for Medicaid, the property may be exempt from recovery by the state government. This can help preserve the property for the benefit of the remainder beneficiaries, who can enjoy ownership rights while the life tenant receives necessary care.
#4: Potential Tax Benefits
In Maryland, a life estate deed may have certain tax advantages. When property is transferred through a life estate deed, the property owner retains a life estate interest, which is considered a partial interest in the property. This can result in potential tax savings, as the property’s value for estate tax purposes may be reduced, ultimately minimizing the tax burden on the remainder beneficiaries. It is essential to consult with a tax advisor or attorney to fully understand the tax implications specific to your situation.
How An Estate Planning Attorney Can Help
A life estate deed is one of the tools that your estate planning attorney may discuss with you, as part of an overall estate plan that aligns with your specific goals and circumstances. With careful consideration and professional guidance, a life estate deed can be an effective strategy to protect your property and secure your legacy for future generations. Contact us today for a private consultation with one of our estate planning attorneys at Frame & Frame Attorneys at Law.
