Think twice before just giving away the farm.

Many property owners would like to give their real estate to their children without going through probate, or without the risk of the child’s spouse getting some or all of it in a divorce. An inter vivos transfer of property is becoming a more common  alternative to conveying property via a will. Property owners  can deed Vermont real estate  while retaining a life estate as well as the power to sell or mortgage the property during the grantor’s lifetime. These deeds are commonly referred to as “L.B.J. (Lady Bird Johnson)” deeds.  A recent Vermont Supreme Court decision affirmed the protections provided by “L.B.J.” deeds. An LBJ deed conveys an expectancy interest to the grantee.  Per the Vermont Supreme Court’s recent holding, the Family Court does not have jurisdiction to divide an expectancy interest of a spouse.  Conversely, all property owned by divorcing parties, regardless of title ownership, is joint property and is included in the post-divorce division of property.

In Cook v. Coburn, 2014 VT 45 (2014), the Husband held title to his family’s farm; however, the warranty deed was subject to his mother’s life estate and power to mortgage and sell the property during her lifetime.  Husband’s mother retained full control over the property during her lifetime, which included an ability to sell and mortgage the property.  The Court said that the family farm should not have been divided in the divorce or treated as joint marital property because the Husband was a mere “heir apparent,” had no legally enforceable property rights, and was not actually conveyed anything.

Husband’s interest was only an expectancy interest, subject to change based on his mother’s wishes.  The Court reiterated that such expectancy interests should only be considered in relation to the Husband’s opportunity to acquire future assets and income under its previous decision in Billings v. Billings, 190 Vt. 487 (2011), and the subsequently amended statute, 15 V.S.A. §751(b)(8).