Would there be any reason for going that route in lieu to a Trust? 31 Answers as of July 07, 2013

My mother's will state that her estate shall be left to her five children equally. However, to avoid probate, etc., three of my brothers and my mother met with a lawyer and proceeded with a Quitclaim Deed transferring title of her house (while retaining life estate) to one of my brothers.

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Law Offices of Gerald A. Bagazinski
Law Offices of Gerald A. Bagazinski | Gerald A. Bagazinski
I am a bit dubiuos of using a quit claim deed in many circumstances to transfer property to one person so they can transfer it to everyone after a parents death. A ladybird deed can be used to help maintain eligibility for medicaid.
Answer Applies to: Michigan
Replied: 12/30/2012
Law Office of Edward M. Burgh, APC | Edward M. Burgh
If the Will said that her estate was to go equally to the children, why did end up with one child, rather than being sold? I think you need to hire an attorney to look at this.
Answer Applies to: California
Replied: 12/24/2012
Law Office Of Victor Waid
Law Office Of Victor Waid | Victor Waid
I don't believe the method the attorney chose to transfer the property to your brother with a reservation of a life estate, was the best way of making the transfer and may not necessarily avoid probate; transfer should have been handled through a trust with the mother retaining the right to change beneficiaries or allocation of share of the asset, which would have been distributed upon her death. What if your mother needs to sell the property to drum up money for healthcare expenses, or other expenses? She cannot now with this deed on the property to the son, as she has effectively transferred title to the son. If she is receiving medical, upon her death, Medical will look back five years to see if the transfer was for fair consideration as to value, and if not seek to set aside the transfer to make a claim for any expenditures on her behalf. Besides a Quitclaim Deed releases only whatever interest your mother had in the property, and is not good enough for a title company who wants a grant deed transfer. Lastly, the brother who received the title by quitclaim could sell the property, even though subject to a life estate.
Answer Applies to: California
Replied: 12/23/2012
Hamblin Law Office | Sally Hamblin
That just changed her entire intent of the will. Now only the one person gained the home solely. No others have rights. So the reason was greed and kick you all in the teeth. It happens far too often.
Answer Applies to: Michigan
Replied: 12/21/2012
Law Office of Andrew Kern
Law Office of Andrew Kern | Andrew Kern
If 5 people are going to inherit the house then use a Trust. If the house is quit claimed to one person that person has full and clear legal title to it without having to share with the other siblings if he or she does not want to share an interest in the home.
Answer Applies to: California
Replied: 12/21/2012
    Lampton Law Firm LLC | Norman Lampton
    This is an old and common practice in Missouri but I prefer a trust if there is substantial personal property or if not a Section 461.025 deed. The quit claim process has tax; fraudulent transfer act and numerous other ramifications. When your mother passes as it is now the one brother receives the property as his alone.
    Answer Applies to: Missouri
    Replied: 12/20/2012
    Zahaby Law Offices
    Zahaby Law Offices | Jon A. Zahaby, Esq.
    This was very bad tax advice. When individuals transfer interest to real property during their lifetime their beneficiaries lose the step up in basis.
    Answer Applies to: Hawaii
    Replied: 12/20/2012
    Martinson & Beason, PC
    Martinson & Beason, PC | Douglas C Martinson II
    If your mother transferred this to one of her sons, then he will get it at her death. The other brothers will not receive the house under the will because she will not have an interest in the property at her death.
    Answer Applies to: Alabama
    Replied: 12/20/2012
    Frederick & Frederick PLC | James P Frederick
    The method used would be a lot cheaper than a trust. That would be the primary benefit.
    Answer Applies to: Michigan
    Replied: 12/20/2012
    James Oberholtzer, Attorney at Law
    James Oberholtzer, Attorney at Law | James Oberholtzer
    Yes. After her death, the house will be owned by one brother instead of all of you.
    Answer Applies to: Oregon
    Replied: 12/20/2012
    Neal M. Rimer, Esquire
    Neal M. Rimer, Esquire | Neal M. Rimer
    This is a bad method of attempting a disposition on death. Your brother, the owner, has no obligation to make gifts to his siblings upon your mom's death. If your brother does make distributions to his siblings, he is making a gift which may require the filing of gift tax returns and may cost your brother money, either in the erosion of his unified credit or otherwise in cash. If you brother transfers interests in the house to his siblings, there is NO exemption with the assessor and the property taxes will go up. The better method is either to go through probate or do a living trust.
    Answer Applies to: California
    Replied: 12/20/2012
    Goldsmith & Guymon
    Goldsmith & Guymon | Dara Goldsmith
    It saved a lot of money, but it is not without risk. There is nothing that requires your brother share with the other children. In Nevada, she could have executed a pay of death deed in favor of all of the children. That would have been as affordable and would provide all children the protection of not leaving it to one.
    Answer Applies to: Nevada
    Replied: 12/20/2012
    Kram & Wooster, P.S. | Richard H. Wooster
    If your mother wants that brother to get the house.
    Answer Applies to: Washington
    Replied: 12/20/2012
    Gates' Law, PLLC | Thomas E. Gates
    Your mother's actions, if stated correctly, vest her rights to the house to the sole brother. The remainder of her estate would be distributed as specified in the will. If the house had been transferred into a Trust, she could have had the house vested with all of the Trust beneficiaries. See could have done the same in her will, but as you point out it be through probate.
    Answer Applies to: Washington
    Replied: 12/20/2012
    Asset Protection and Elder Law Center
    Asset Protection and Elder Law Center | Shadi Alai-Shaffer
    Well if you already did this it may be too late to undo. I wouldn't do that. The transfer to your brother means it is his asset. Is he married? Does he have kids? Creditors? All these things can effect the home and each one of you. Also, now your brother needs a trust. That was terrible advice. Every home in California over $50K needs to be in a trust to be properly protected and to avoid probate. Spend the money now on a Trust otherwise you will spend it X5 later for not having the home in a trust.
    Answer Applies to: California
    Replied: 12/20/2012
    THE BROOME LAW FIRM, LLC
    THE BROOME LAW FIRM, LLC | Barry D. Broome
    I usually recommend a trust if the value of the estate exceeds $1,000,000. Another method of avoiding probate is having the title to all property to the kids name with the parent having a life estate. The negative to the last arrangment is one of the kids could be sued and the property could be taken. Your financial plan is not complete until it is co-ordinated with your estate plan. Will your family be provided for when you are gone? Without a Will, the court will decide.
    Answer Applies to: Georgia
    Replied: 12/20/2012
    Whiteford, Taylor, & Preston | Edwin Fee
    Now the house will pass to your brother only, rather than to the five children equally.
    Answer Applies to: Maryland
    Replied: 12/20/2012
    O'Keefe Legal Services, L.L.C.
    O'Keefe Legal Services, L.L.C. | Sean P. O'Keefe
    In Maryland, passing title to a house can be done by changing the deed during one's life (such as by using a "life estate deed" like you mentioned), by having a trustee hold title to the deed to pass later (such as under a trust that you mention), or by a transfer after death through probate. Using a life estate deed may be simpler than using a trust to pass title to the house after your mother's death, but whether it's the best choice depends on what her goal(s) is. If your mother's will states she wants probate property to pass to her five children equally, then the child who is to receive the house by operation of law under the life estate deed may receive the house in addition to an equal share of the probate assets, making an unequal outcome (assuming no other non-probate assets).
    Answer Applies to: Maryland
    Replied: 12/20/2012
    Peters Law, PLLC
    Peters Law, PLLC | Mark T. Peters, Sr.
    You should take the question up with your mother, or with her permission, the lawyer. In effect, a trust has been set up; you just have to trust your brother to share the house with his 4 siblings.
    Answer Applies to: Idaho
    Replied: 12/20/2012
    WARM SPRINGS LAW GROUP | Elliott D. Yug
    Best bet is to do a trust. Having the house in the name of one brother and expecting him to sell it and divide the proceeds on her death is a bit much. Also there may be tax consequences if he is gifting large amounts of money.
    Answer Applies to: Nevada
    Replied: 12/20/2012
    Byers & Goulding, PLC | Andrew Byers
    That means that brother will be the sole owner of the property upon your mother's death.
    Answer Applies to: Michigan
    Replied: 12/20/2012
    Irsfeld, Irsfeld & Younger LLP | Norman H. Green
    Yes, that's a great idea. Now the house will belong to your brother, and if he has any creditors, they get priority over the rest of you. Plus, he may get in trouble for not filing a gift tax return when he gives each of you 20% of the proceeds fro sale, assuming that he does so. And if he doesn't do so, what recourse do you have?
    Answer Applies to: California
    Replied: 12/20/2012
    Smith Barid, LLC
    Smith Barid, LLC | Richard S. Barid
    It depends on what your mother is trying to accomplish. If avoidance of probate is the only concern, the deed she signed will work. Some potential problems with this approach are: The remainder interest (the part transferred to your brother) is now subject to his creditors. This can become a problem if he has creditor problems. Also, it now becomes more challenging to sell or refinance the property since to do so would require your mom and your brother to participate. Further, the burden and responsibility now falls to your brother to transfer the home equally to all five kids after your mother's passing. To do so, he'll have to make gifts of those interests from himself to each of his siblings. Depending on the value of the house this may eat into his own gifting/estate tax exemption. In addition, the transfer of the remainder interest is a penalized transfer for Medicaid purposes. To the extent your mom needs Medicaid (usually for nursing home care) any time within 60 months of the transfer to your brother, there will be a penalty period (time during which Mediaid benefits are denied) the length of which is determined by your mom's age and the value of Medicaid rules will assign to the remainder interest which went to your brother. Within 60 months of the transfer to your brother, that penalty period doesn't start to run until your mom is otherwise Medicaid eligible and applies for Medicaid. That penalty can be undone by transferring the property back to your mom prior to making the Medicaid application, which of course will likely make it a probate asset again. A good elder law attorney may be able to help you find other strategies to avoid probate while planning for Medicaid at the same time. Transfer of the house and her other assets to a revocable living trust, would avoid death probate (the probate most of us think about) and also avoids living probate (the need for a guardianship / conservatorship if your mother becomes incapacitated). It gives seamless control of the trust assets to whomever she appoints as her successor trustees (if she's fully competent, she remains the trustee until such time as she's no longer competent). It would also be possible to use an irrevocable trust. Your mother would appoint someone else as trustee (perhaps one of more of her children) to manage the assets. If it's done correctly, this sort of trust can help with eligibility for certain VA long-term-care benefits and can start the 60 month clock ticking for Medicaid eligibility. The elder law components of this are somewhat complex. It would be worth your mother's time to see a qualified elder law attorney if she has any concerns about long term care and the cost of that care.
    Answer Applies to: Georgia
    Replied: 12/20/2012
    Meissner, Joseph & Palley, Inc.
    Meissner, Joseph & Palley, Inc. | John Palley
    The problem with just deeding property is that you lose the step up in tax basis at death. This can be very significant depending on how long the house has been owned by mom and what it's worth. Whereas if the property is inherited at death, via probate or via a living trust, the property steps up in basis and taxes are reduced or eliminated. For example, let's say a house is worth $200,000 but mom paid $50,000 for it. Roughly speaking mom's basis is $50,000. If she gifts the property during life the kids receive her basis of $50,000. If the property passes after death the income tax basis steps up to current value of $200,000. So, in that hypothetical, the tax difference could easily be $30,000, or more, when the property is sold. That is, $30,000 in capital gains tax would be avoided by having the property transfer at death and then be sold. Even if it went through probate the family comes out way ahead financially. This is a perfect example of people taking the law into their own hands can shoot themselves in the foot. Also, don't forget to file the parent-child exemption to avoid a property tax re-assessment.
    Answer Applies to: California
    Replied: 12/20/2012
    Woolley Wilson, LLP
    Woolley Wilson, LLP | William R. Wilson
    The brother now owns the house. This changes the effect of the Will.
    Answer Applies to: Texas
    Replied: 12/20/2012
    Neil J. Lehto, Esq.
    Neil J. Lehto, Esq. | Neil J. Lehto
    A transfer to one of your brothers only is final. Neither your mother, the probate court nor any of the other children can require your brother to divide the home among you if he decides against doing so. The transfer to your brother is a taxable event, local property tax and federal gift tax the consequences of which may depend upon its fair market value, homestead exemption and her age.
    Answer Applies to: Michigan
    Replied: 12/20/2012
    Law Offices of Phillip Day
    Law Offices of Phillip Day | Phillip Day
    Maybe. In Florida, the most common way and most accepted way to avoid probate is to use a revocable living trust. However, a trust is asset driven and therefore the more assets a client has, the more the trust does for the client. In cases where there are very few assets other than the home, and when there are few children, it might make sense to use an enhanced life estate deed which transfers at death the interest in the home to the surviving beneficiaries. This technique avoids probate while keeping control of ownership with mom and dad. Using a straight forward life estate is generally not recommended because that becomes a completed transaction leaving very little flexibility for the parents. So to answer your question, it may have been an issue of cost as to why your parents went with a life estate over a trust. However, at the end of the day, assuming it is a life estate deed, it is no longer commonly used because of the inherent disadvantages built in to said technique. As always, I can only speak in generalities as I do not know the specific facts of the case and it is always advisable to bring your question directly to an experienced estate planning attorney that can review the information more carefully and provide you with the appropriate guidance.
    Answer Applies to: Florida
    Replied: 12/20/2012
    Musilli Brennan Associates PLLC
    Musilli Brennan Associates PLLC | John F Brennan
    Probate is avoided by a comprehensive plan, not the transfer of a single asset. Speak with an attorney, thus far, you have given the house to one brother and removed the rights of the the others to any consideration for its transfer.
    Answer Applies to: Michigan
    Replied: 12/20/2012
    Ben T. Liu Law Office
    Ben T. Liu Law Office | Ben T. Liu
    The deed now controls the house and your brother will get it when your mother dies. This is not what she wants. Better talk to your mother and have things set right. Hopefully your brother will cooperate. Even if there is an understating that the brother will share the house. He may change his mind.
    Answer Applies to: Michigan
    Replied: 12/20/2012
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