Q: Deed to 4 people,power of appt reserved, one person dies. new deed from same grantor to remaining grantees. Noe estate?

A: In estate planning law and also in elder law planning, many attorneys use certain types of deeds so that clients may gift or transfer their residence or other real property to the next generation. These life estate deeds sometimes transfer the property directly to children or grand-children; an alternative approach is to transfer the property to a trust. For elder law planning, such trusts, if intended for Medicaid qualification and nursing home planning, are usually irrevocable and must be in place for several years to be effective. In such transactions, most attorneys retain a life estate or life rights (the right to use and occupy the real property for life) back to the parent or grand-parent who is making the gift transfer. In these transactions, the attorney also often advises the clients who are making the gift deed to reserve a limited power of appointment back to themselves in the wording of the deed or the wording of the trust; this means that the person who made the gift transfer retains the legal right to change or reconfigure who is to receive the property (in effect, who will be the beneficiaries)when the person who made the gift transfer dies and their life estate rights or life rights end. Under the limited power of appointment, the person who originially made the gift can change the terms of the transaction at a later date--instead of the the property going to 4 children as beneficiaries as set forth in the original deed or trust gift transaction, the documents could be changed or amended so that the real property now will only go, as examples, to 3 or 2 of the 4 children orginally named in the transaction. This is called the exercise of a limited power of appointment; this exercise is used to change or modify who will receive the property when the original gifting parent passes away. It is intended for use when a person who was to receive under the original transaction dies, as unfortunately the case in your question, becomes disabled, divorces or perhaps goes bankrupt, or acts out inappropriately to the dissatisfaction of the parents who made the original gift transaction. These types of transactions usually avoid probate--however, there could be state inheritance or estate tax and federal tax even on this asset if the estate exceeds certain limits ($1 million New York and $5 million federal). The deed usually will have to be redrawn and refiled with the county clerk to exercise the power of appointment so that only 3 instead of 4 persons receive ownership of the asset when the transferor passes away. We emphasize that a deed exercising a reserved power of appointment is quite a complicated one--you should use the services of a knowledgeable estate planning or elder law attorney to make sure that the deed and other paperwork is correctly filed. In closing, please note that a "power of appointment" is a different form than a "power of attorney" which is not directly involved in this question and answer.