Life Estate v. Transfer on Death Deeds

A life estate deed is a special deed form that allows a property owner to use the property during life and transfer the property automatically at death. Therefore, life estate deeds are specifically designed to transfer the property at death without losing the ability to use the property during life.

Life estate deeds work by dividing the property into two types of interests:

•        New Owner (Life Tenant) – The person who owns the life estate is called the life tenant this is usually the grantor (person signing the deed), but doesn’t have to be.

•        Future Owner (Remainder Beneficiary) – The person who will acquire the property when the life tenant dies is called the remainder beneficiary or remainderman.

Life estate deeds avoid probate at death, but at the cost of sacrificing control during life. The life tenant cannot sell or mortgage the property without the consent of the remainder beneficiaries. The life tenant also owes duties to preserve the property for the benefit of the remainder beneficiaries and must take their interests into account in making decisions.

What is a transfer on death deed?

A TOD deed allows the owner to name a beneficiary on the deed, similar to naming a beneficiary on a life insurance policy or bank account. When the owner dies, the beneficiary named on the deed receives the property. During the owner’s life, the owner can freely revoke or change the beneficiary designation without involving or even notifying the beneficiary. This is different from a life estate deed, where the life tenant cannot revoke the interest that transfers to the remaindermen.

Which deed should you use?

Each deed has its own purpose and advantages, depending on your estate planning needs. If you would like more information, please contact the Pippin Law Firm to set up an appointment to discuss which option would work for you!

This article provides a broad overview of common legal concepts.  It is not intended to be and should not be construed as legal advice for any particular fact situation.