Tidbits

Skye v. Hession: Power of Appointment in Life Estate Deeds

Skye v. Hession

16-P-282 Massachusetts Appeals Court April 28, 2017.

A recent appeals court case involving probate litigation touches on a number of points, the one I found most interesting was its confirmation of a life estate deed containing a limited power of appointment.

In general, a life estate deed is a real estate deed allowing one person to own the property for the rest of their life and to name remainderpersons (traditionally known as remaindermen) to own the property at the initial owner’s death.

Life estate deeds can prove useful tools for some people for a number of reasons: avoiding probate, avoiding MassHealth/Medicaid estate recovery upon death because it does not go through probate, and simple proof of your direction at death for your real estate which has already been filed at the registry of deeds.

A power of appointment is when someone is given the ability to direct what happens to certain assets or property, whether or not that property belongs to the person with the power of appointment. A trust, for instance, may grant a specific individual the power to direct certain assets by will. This is a special power of appointment called a testamentary power of appointment.

A simple life estate deed without a power of appointment, however, leaves some unfortunate gaps for the grantor, the individual who set up the life estate. One of those is the inability to change the remainderpersons if those named in the will are no longer proper or feasible.

In Skye v. Hession we learn about a grantor who created a life estate deed for her home where she kept ownership for her lifetime and named her children to have three equal shares at her death. The life estate deed specifically stated that the grantor kept a power of appointment allowing her to change the remainderpersons by deed or by will. Just two years after the grantor signed the life estate deed she executed a new will which used the special power of appointment from the life estate deed to change one daughter’s interest in the remainder share to five percent while presumably greatly increasing the remainder shares of the other children. The appeals court decision does not tell us why this was done. Less than a year after the will was signed the grantor passed away. The case was brought by the sister whose interest had been greatly lessened through her mother’s testamentary power of appointment, a power of appointment used in a will. The appeals court affirmed the lower court’s ruling in validating the special power of appointment in the deed and the grantor’s ability to use the power of appointment.

Skye v. Hession does not discuss why the one daughter was almost completely taken out as a remainderperson, but there are many reasons why a grantor would want the ability to change a named remainderperson. Whether because of an argument with the remainderperson, a remainderperson’s outstanding debts, or the remainderperson predeceasing the grantor there are any number of reasons why a grantor would want to keep this avenue of change open through a special power of appointment and Skye v. Hession affirms the ability to do so.

Interested in a life estate deed or other estate planning advice? Schedule a consultation with Attorney Alexis B. Kaplan today: abkaplanlaw.acuityscheduling.com.

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