What is a Life Estate Deed in Ohio?

An essential part of estate planning is creating the necessary documents to ensure your assets are secure during your lifetime and that ownership will transfer to the correct parties upon your death. As part of your estate plan, you may consider using a life estate deed to transfer property ownership. When a life estate deed is used, the property owner retains a “life estate,” meaning they continue to own and can live on the property for the rest of their life. The property transfers to an individual of their choosing upon their death.

A life estate deed can be a useful estate planning tool that allows a property owner to transfer property to a named beneficiary while retaining the right to use the property for the remainder of their lifetime. While a life estate deed is similar to a transfer on death deed, there are key differences that you must understand to decide which estate planning tool is right for you.

What Is a Life Estate Deed?

A life estate deed is a way to transfer property from one person (the Grantor) to another person (the Grantee, also known as the “remainderman” or “life tenant”) upon the death of the property owner. The life estate deed transfers property ownership, but the Grantor reserves an interest in the property for the remainder of their lifetime. Upon the Grantor’s death, property ownership passes to the Grantee.

A life estate deed is irrevocable, and the Grantor and Grantee both have an ownership interest in the property until the death of the Grantor. While the Grantor can remain on the property, they no longer have full control or ownership of it and must seek the Grantee’s permission before making major changes to the property, such as selling it or taking out a mortgage.

How Is a Life Estate Deed Different from a Transfer on Death Deed?

At first glance, a life estate deed and a transfer on death deed seem to accomplish the same goal: they both convey property to a Grantee upon the death of the owner. However, there are key distinctions between the two, and understanding the differences is essential to determining which one is right for you.

Life Estate Deed

A life estate deed allows the property owner to transfer ownership of the property while retaining an interest in it during their lifetime. Upon the Grantor’s death, property ownership passes to the Grantee. The Grantor and the Grantee both own an interest in the property as soon as the deed is signed. Either owner can convey their share at any time, to anyone of their choosing. A life estate deed is irrevocable, meaning the Grantor cannot later change their mind and take it back.

Transfer on Death Deed

Under a transfer on death deed, the property owner retains full ownership of the property during their lifetime and conveys their full interest upon death. The Grantee has no ownership interest in the property during the lifetime of the Grantor. Unlike a life estate deed, a transfer on death deed can be revoked at any time.

What Are the Advantages of a Life Estate Deed?

A life estate deed is a valuable option for Ohio residents who wish to simplify the estate planning process, enabling them to transfer property while avoiding the time and costs associated with probate. Once the life estate is created, the property automatically transfers to the Grantee upon the Grantor’s death, without the need for a Will or probate. The life tenant can use and occupy the property for the remainder of their life, knowing exactly what will happen to it upon their death.

A life estate deed provides protection from Medicaid asset recovery. When an individual needs medical care and is eligible for Medicaid, the government may seek reimbursement for the cost of care after the individual passes away. A life estate can protect property from being included in the Medicaid recovery process because the property transfers to the Grantee immediately upon the Grantor’s death.

What Are the Disadvantages of a Life Estate Deed?

While a life estate deed can be beneficial in some situations, it can cause complications in others. The life tenant loses the ability to make significant decisions regarding the property without the Grantee’s approval. For example, the life tenant must obtain the Grantee’s approval to sell the property, refinance, or take out a mortgage. If the Grantee finds themselves in financial trouble, a creditor may file a lien on the property, which could pose challenges for the life tenant.

Do I Need a Life Estate Deed as Part of My Estate Plan?

Deciding whether a life estate deed makes sense for you depends on your situation, goals, and the way you want to transfer your property. Gudorf Law Group, LLC, can analyze your situation and provide valuable advice and guidance to prepare a comprehensive estate plan. Contact us today to schedule a consultation to discuss your situation and how we can assist you.