Turner Padget Insights
Life Estate Deeds vs. Joint Deeds: Which One is Right for You?
Posted On February 4, 2025
Estate planning often involves decisions about what should happen to your home or other real property in the future. For many people, the goal is simple: make things easier for loved ones while maintaining as much control as possible during life. Two commonly used tools—life estate deeds and joint deeds with rights of survivorship—can help accomplish that goal, but they work in very different ways.
Understanding the pros and cons of each can make all the difference.
What Is a Life Estate Deed?
A life estate deed allows someone to keep full use and control of their property during their lifetime, while ensuring that it passes directly to a chosen heir after death—without going through probate.
In practical terms, this means the property owner keeps the right to live in, use, and enjoy the home for life. When they pass away, ownership transfers automatically to the person named in the deed. Because the transfer happens outside of probate, it can save time, expense, and stress for loved ones.
Life estate deeds also come with potential tax advantages. The person who inherits the property (called the “remainderman”) typically receives a stepped-up tax basis. That means if the property has increased in value over time, capital gains taxes may be significantly reduced if the property is later sold.
For example, if a home was originally purchased for $250,000 and is worth $1,000,000 at the owner’s death, the tax basis usually steps up to the value at death. This can result in substantial tax savings. The initial transfer of a future interest is considered a gift and must be reported, but for most people, it falls well within the current lifetime gift tax exemption.
Life estate deeds can also be a helpful tool in Medicaid planning, as the property is generally not subject to estate recovery after death.
That said, life estate deeds are not easily undone. Selling or changing the property typically requires the written consent of everyone named in the deed. If the property is sold during the owner’s lifetime, the proceeds must be divided between the life tenant and the remainderman based on their respective interests. While the person living in the home may qualify for a capital gains exclusion, a remainderman who does not live there may owe capital gains tax on their share.
What About a Joint Deed with Rights of Survivorship?
A joint deed with rights of survivorship gives two or more people equal ownership of a property during their lifetimes. Each owner shares responsibility for expenses like taxes, insurance, and maintenance. When one owner passes away, their interest automatically transfers to the surviving owner, without probate.
This type of deed is often used by spouses or close family members who truly intend to share ownership and responsibility while they are both living. In the right circumstances, it can be simple and effective.
However, joint ownership can also create complications. Any sale or refinancing requires the consent of all owners, and each person is entitled to a share of the proceeds. If one owner lives in the home and the other does not, capital gains tax treatment may differ. Joint ownership also does not provide a full stepped-up basis at death and may negatively impact Medicaid eligibility.
Choosing the Right Tool
The right choice depends on individual goals. Some people want to maintain control of their home while making the transition to the next generation as smooth as possible. Others are comfortable sharing ownership now with someone they trust. Each option has legal, tax, and practical consequences, which is why thoughtful planning is so important.
Estate planning is ultimately about peace of mind—knowing that your wishes are clear and your loved ones are protected.
How Turner Padget Can Help
Since 1929, Turner Padget has been helping clients navigate trust, estate, probate, and legacy planning with care and clarity. The firm’s Trusts & Estates team assists with wills and trusts, estate planning and structuring, probate and estate administration, fiduciary representation, trust administration, guardianships, litigation, and business succession planning. With attorneys located throughout South Carolina, Turner Padget offers both local insight and personalized service. To learn more about which estate planning tools may be right for you, please reach out directly or call 803-254-2200. Turner Padget is here to help protect what matters—today and for the future.
