In one of your recent LISTEN TO LAWRENCE LETTERS you said that you cannot put a beneficiary on a deed to avoid probate. I think you’re wrong. Doesn’t a life estate avoid probate?
OK, buckaroo…here we go.
YES, a life estate avoids probate. However, this may look like an apple to you but it really is an orange. Let me explain. A life estate is created by you signing a deed transferring your house to your children (or anyone else) NOW, subject to you retaining the exclusive right to enjoy or otherwise live on the property for the rest of your life. Upon your death, your life estate is extinguished and your children will own the whole property, without any need to probate the will. The reason for this is that they already own it and your life estate simply disappears.
For the record, we do not usually recommend that our clients create life estates because they come with many negatives. For example, (1) you will need the children’s consent to sell the property during your lifetime; (2) you may have huge capital gains upon the sale and you will not be able to use your $250,000 capital gain exclusion to its full extent; and (3) you may also have problems with Medicaid when you receive back the value of your life estate.
The original question was whether you can retain ownership of your home but put a beneficiary on it to avoid probate. The answer remains NO!