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In our last video podcast we looked at the Hampden County case where a widow won a one
hundred thousand dollar verdict because she and her husband had transferred assets to
their children without keeping a life estate.
Today we'll look at the opinion of the legal expert who convinced the jury.
I'm John Roberts, an attorney practicing Estate Planning, Elder Law and Disability Law in
Hampden County
Also during this podcast will look at some of the risks that people take when they use
life a state deeds to make transfers.
And I'll give you my opinion on why these transfers are so risky.
And finally, we'll look at the first step that you can take to reduce risk when you
plan your estate.
Let's begin with an understanding of: What is a life estate?
In our example, a parent owns her house. She signs a deed that transfers her house to her
son, but she continues to own a life interest in the house. That's why the deed is called
a life estate deed. When the Parent dies, the Son is left owning the house, because
of that deed.
The legal expert in the Hampden County case looked at the facts, beginning with a meeting
that the parents had with their son and daughter, and their family attorney. At that meeting
the father was described as "not well" "on oxygen" and they discussed the prospect of
putting property into the names of the son and daughter so that the parents would become
eligible for long-term care paid by Medicaid.
The family attorney recalled that there was a discussion about reserving a life estate
in property, but that the parents decided they didn't need to have a life estate deed
because they trusted their children.
The legal expert pointed at testimony that the parents wanted their son and daughter
to end up with a house after both parents had passed, but instead the parents didn't
receive any legal interest or right to live in the property and the son or daughter could
have picked the parents from the property at any time or sell the property. And, any
creditor of either the son or daughter could attach the house and sell it to satisfy the
debts of either child.
The legal expert explained how reserving a life a state would have given the parents
a legally enforceable right to live in the premises, and make it possible for them to
obtain a home equity loan.
And the expert witness explained another legal concept that was never discussed with the
family. The deed could have created a special power of appointment: a power that would have
allowed the parents to change their mind about who would own the property in the end.
Let's visualize the power of appointment as a power switch. When it's in the on position
the property passes to the person designated in the deed to receive the property. The power
of appointment gives the person who controls the switch the ability to change who becomes
full owner of the property. Reserving a power of appointment allows the parent to keep a
high degree of control over the property. The power allows the parent to turn off the
ownership of one person and give full ownership to someone else.
So, can we safely conclude that the widow in this case would have had no emotional distress
damages if she had used a life estate deed with reserved power of appointment? I'll explain
my opinion about that in just a minute.
But first, the question that you may be considering: should you sign a life estate deed transferring
ownership of your home? If you are pondering that question, you can look up an article
on our website about risks that you must consider before transferring ownership of your home.
You can find the article by using the search box and typing in the keyword "risks." There
have been cases where life estate deeds caused damages at the time when both the parent and
the child are holding an ownership interest in the property at the same time.
The trouble begins with questions over who controls the property, and how third-parties
like the IRS, Medicaid, mortgage bankers, and other family members treat the situation.
In the article, you can read about the couple who lost their principal residence income
tax exclusion because of a life estate deed. And about the widow who disqualified herself
from Medicaid nursing home coverage.
Some problems happen even after the parents have died. The life estate deed that forced
the family to probate the estate of a deceased child is one example.
All of these problems can happen to anyone who uses a life estate deed, even a life estate
deed that includes a power of appointment.
Damages caused by life estate deeds are often emotional distress damages. As these examples
illustrate, the emotional distress makes things harder for families who are already experiencing
grief during times of loss.
Experiencing grief is the title of a booklet that we make available to our estate settlement
and probate clients who are interested. The booklet points out that times of loss are
not the best times for important decisions, but sometimes those decisions cannot be delayed.
And the booklet contains many insights about how grief affects different people, including
widows.
As we take this final look at the 2013 Hampden County Superior Court case, we ask the question:
would a life estate deed have saved the widow from grief over loss of her husband and estrangement
from her son. All of the things that the widow complained about after her husband's death
could have happened with a life estate deed, even a life estate deed that had a power of
appointment. Notwithstanding the verdict, the Hampden County Superior Court judge found
that no money damages could be paid for the widow's emotional distress, and the judge
set aside the hundred thousand dollar jury verdict.
So before we recommend any legal documents or asset transfers, we need to understand
the personal interests and the emotions that are even more important to you than money.
You can take a first step toward creating an estate plan that will protect you and your
family by making an inventory of your assets, and understanding how each asset is owned.
We have a Trust and Estate Planning Template on our website to help you do this.
The template has a place for each asset, and calculates the total value of your estate.
Married couples can calculate the value of individually owned assets, and jointly owned
assets. When you schedule an Educational Meeting, you'll become able to print the template on
paper, so we can begin the process of planning your estate.