What is a Lady Bird Deed?
A lady bird deed (also known as an enhanced life estate) is a document that allows the property owner to retain full control of their property during their lifetime but upon death, transfers the property to the named remainderman.
Every state has the concept of a life estate deed, but only 5 states, Florida being one of them, has the ENHANCED life estate deed where once we add a remainderman, the property owner doesn’t give up control. If we were to draft this deed in New York or New Jersey, for example, once we add a remainderman to the deed, should the property owner want to sell or refinance, the remainderman would be required to sign off. However, in Florida, with the enhanced life estate (or lady bird deed), the property owner can still retain all of their power and don’t need to get the remainderman involved for any property changes. Essentially, in FL, the remainderman has no power until after the property owner’s passing.
What are the advantages of a Lady Bird Deed?
A lady bird deed is especially popular in Florida due to its benefits to one’s estate plan. Here are the key advantages:
- Avoids Probate: allows the automatic transfer of property upon the owner’s death to named beneficiaries, avoiding the probate process.
- Ownership Rights: with a lady bird deed, the owner retains full power to live in, sell, mortgage, or lease the property without the beneficiary’s permission.
- Cost Effective: is a less costly method of transferring property upon death compared to creating a living trust.
- Amendable & Revocable: the owner may change the deed to include a different beneficiary or cancel it entirely.
- Medicaid Eligibility: assists Florida residents in qualifying for Medicaid benefits.
- Tax Benefits: beneficiaries do not pay taxes on an increase in value of the property that occurred during the owner’s lifetime.
What are the disadvantages of a Lady Bird Deed?
The primary disadvantage of a lady bird deed is its limited asset protection during the owner’s lifetime. In turn, the property may be subject to creditor claims if homestead protections do not apply or if the owner faces a “super creditor”.
A “super creditor” is a creditor, such as the IRS, who can override state law exemptions (like the Homestead Exemption) and reach assets that would otherwise be protected.
What is the difference between a lady bird deed and a trust?
A lady bird deed is a type of ownership. A person (or people) own the property for life and there is a remainderman to get the property when that person (or people) pass away.
A trust, on the other hand, is a fictitious entity, like a corporation or LLC, that would own the property. Once a deed moves the property into the trust, the trust terms control and the trust property would follow the trust beneficiary designations.
Sometimes, we do draft a lady bird deed into a trust. This is common and something to consider when attempting to avoid probate but not wanting to list beneficiaries on the deed directly.
At the Law Offices of Odelia Goldberg, we view a lady bird deed as one of the many tools available to constructing a well thought-out, customized estate plan.
Please call our office at 954-799-4116 to discuss how The Law Offices of Odelia Goldberg can help you with your legal issues. Virtual and telephone appointments are available. In some cases, home or hospital appointments may be arranged.
