27 VSA Chapter 6, known as the Enhanced Life Estate Deed Act, became effective July 13, 2020 addressing transfers after the effective date of the Act.
A life estate with reserved powers is created when the record title holder (the “Grantor”) conveys title to one or more persons (the “Remainderman”), and reserves a life estate together with an additional right to sell, mortgage, lease, gift, or otherwise convey with or without consideration fee title or any lesser interest.
A title examiner may presume a subsequent conveyance (including a conveyance of the fee, a mortgage, a lease, or the conveyance of some interest less than the entire fee) by the Grantor, without joinder by the Remainderman, is a valid transfer of the specified interest as long as the right to convey such interest was granted to or retained by the Grantor.
NOTE: This Standard is not intended to address the efficacy of these deeds for Medicaid Planning purposes, or their compliance with Medicaid regulations.
Comment 1. Without reserved powers, creation of a life estate results in two vested estates, an interest for life and a remainder interest. The holder of a life estate without reserved powers cannot convey, alter, revoke or otherwise affect the remainder interest nor convey a greater estate.
Deeds creating an enhanced life estate with reserved powers have been variously known as – “Ladybird Johnson” deeds, “Granai” deeds, “Medicaid” deeds or “Barre” deeds. See, Aiken v. Clark, 117 Vt. 391 (1952), for a general discussion of the principles applicable to life estate. See, Weed v. Weed, 2008 VT 121, 185 Vt. 83, 968 A.2d 210 (2008) for a general discussion of the principles related to exercising power to convey under a reserved power where the transfer is a gift and not a sale.
Comment 2. Prior to the effective date of 27 VSA Chap 6., no statutory language or universally accepted language exists to create a life estate with reserved powers.
Comment 3. The use of the word “title” in this standard is not intended to define the extent of the holder’s interest.
Comment 4. Title examiners should be aware of the consequences of the holding in Brousseau v. Brousseau, 182 Vt. 533, 927 A.2d 773 (2007)), and in particular the Court’s adoption of the principle that an off record intention, expressed after the date of the conveyance that the conveyance was not intended to create a present vesting of an interest in the property conveyed is sufficient to overcome any presumption of donative intent. Thus, during the lifetime of the grantor of the deed, it is possible for the grantor to assert that there was no intent to make a present gift of an interest in the property conveyed and thus any transfer of interest apparent in the deed was ineffective.
Comment 5. Inter alia, 27 VSA Chapter 6, includes a statutory form deed such that the provisions of the statute govern any such deed executed after the Effective Date of July 13, 2020.
Comment 6. For the effect of an enhanced life estate prior to the adoption of 27 VSA Ch. 6, see Coburn v. Cook, 2014 VT 45 (2014).
Comment 7: For information related to the potential for a refund of the transfer tax paid on account of an enhanced life estate deed, see 32 VSA 9617(8)(B). If the transfer that was taxed is revoked or revised pursuant to 27 V.S.A. chapter 6, the person who paid the tax may petition for a refund. In the case of a revision, the revised enhanced life estate interest transfer shall be subject to tax under this chapter.
History
September 24, 2010: This standard was added.
September 2020: The Standard was revised, Comment 2 was amended, Comment 5 was added.
September 2022: Comment 6 was added.
September 2024: Comment 7 was added.