The complete ownership of a parcel of land is called the "fee simple." Sometimes fee simple ownership is divided into two parts which are known as a "life estate" and a "remainder." The owner of a life estate (called the "life tenant") owns the property for a period of time that is measured by a person's life. When the person dies, the life estate ends and the title to the property passes automatically to the person who owns the remainder (called the "remainderman"). After the death of the life tenant, fee simple title is vested in the remainderman.
The use of life estates and remainders is sometimes useful to pass title to real estate without having to go through probate. Typically, the owner of property that he or she wants to pass to children would execute a deed which would allow the owner to keep the property during his or her life time but at the death of the owner would pass the title automatically to the children. The owner of a life estate is able to keep the full homestead tax exemption during his or her lifetime and to avoid probate on death.
There is one major drawback which has limited the use of life estates. With traditional life estates, if the life tenant wants to sell or mortgage the property, the remainderman must sign the deed or the mortgage. Frequently, children and their parents would not agree on what should be done with the property.
To correct this problem, real estate attorneys have begun using "Lady Bird Deeds" to create enhanced life estates. In an enhanced life estate, the life tenant retains the right to sell or mortgage the property without the remainderman having to sign the deed or mortgage. There is no statute or case law authorizing enhanced life estates, but Lady Bird Deeds are recognized and accepted by the major title insurance companies in Florida. Because of their flexibility, Lady Bird Deeds are being used more frequently in estate planning.
Enhanced life estates, however, are not without problems. Because the remainder is considered a vested estate, any judgment liens or tax liens against the remainderman will attach to the property, whether it is owned in a traditional life estate or an enhanced life estate. This means that when the property is sold or mortgaged, these liens have to be paid off. In addition, title insurance companies do not recognize the use of Lady Bird Deeds to divest one or more of a group of siblings who own a share to the remainder to give the remainder to other siblings.
Special wording needed in a Lady Bird Deed, and the use of such a deed is something that has serious legal consequences. Consequently, a Lady Bird Deed is not a do-it-yourself project or one that can be done with a pre-printed form from an office supply store. Anyone who is interested in an enhanced life estate should consult an experience Florida real estate lawyer.