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Introduction: The Type of Deed Has Important Ramifications
For most Marylanders, the “family house” is among their most significant assets. In Maryland and throughout the rest of the country, the median price for a house is well above six figures, which means that the family house represents a substantial financial investment as well as a dwelling place. In the recent past on our blog, we’ve discussed the various kinds of property interests which are used to express ownership in a parcel of land; for example, we’ve discussed the concepts of fee simple absolute and fee simple determinable, and why these property interests have significance in an estate planning context. Not only are there various types of property interests, there are multiple types of deeds which denote ownership in property as well. Marylanders who want to invest in estate planning should take the time to know about these different deeds and the implications which follow from them.
Normal Title Deed vs. Life Estate Deed
There are actually quite a few distinct types of real estate deeds which express ownership, but for the purposes of this article we will narrow our discussion to only two: normal deeds and life estate deeds. In this context, “normal deeds” are simply those which express ownership, but do not avoid probate; by contrast, life estate deeds, express ownership, plus remainder interests, and conveniently avoid probate altogether.
A normal title deed is one which, for example, documents fee simple absolute to by identifying the owner’s name and privileges to the property; there are no “remainder interests” as such because the present owner has the full power to dispose of the property after he or she passes away, and there are no conditions which might trigger reversion. This deed would need to be included in the owner’s will if the owner has a specific beneficiary in mind; otherwise, if the owner passes away intestate, the property will be passed along according to default intestacy laws.
A life estate deed functions differently: with this deed, the present owner maintains full ownership for his or her lifetime, but then the property passes to the “remainder” interest holder or holders upon death. And, in doing so, the property avoids probate, so the property avoids going through a complex procedure prior to distribution. Obviously, this type of deed can confer substantial advantages for various reasons.
We’ve discussed life estate interests in detail on your blog before. Life estate deeds are simply life estate interests specifically associated with real property, but of course these interests can be associated with personal property too.
Life Estate without Powers & Life Estate with Full Powers
Current Maryland law recognizes two distinct types of life estate deeds: life estate deeds without power and life estate deeds with full powers. Those contemplating this deed need to learn the differences between these two variations, as these distinct variations have different features. With a life estate deed without power, the present owner loses his or her ability to unilaterally alter the arrangement, and also cannot sell or encumber (with a loan) the property without the remainder interest holder’s prior consent. In other words, a life estate deed without power grants substantial authority to the remainder interest holder, as that remainder person influences the course that the property takes. A life estate deed with full powers is simply a deed which allows the present owner to retain his or her authority to terminate the arrangement and sell or encumber the property prior to distribution.
Contact the Murphy Law Firm for Additional Information
Readers who want to know more about deeds for estate planning, trusts, medical directives, general powers of attorney (POAs), or any other estate planning topic, contact one of the estate planning attorneys at the Murphy Law Firm today by calling 240-219-5243.
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