A Detailed Guide to Lady Bird Deeds

A Lady Bird Deed which is sometimes called an enhanced life estate deed gives you an alternative way you can transfer ownership of property. Rather than taking control or transferring the real estate to your beneficiaries, a lady bird deed gives you the chance to offer yourself a life estate which is also called a life tenancy. And, it also gives the beneficiary some interests when you pass away. 

But, unlike the common life-estate deeds or a direct transfer of property, the life tenant usually has the right to mortgage or sell the whole property without a joinder through the remainderman and get all profits and you can commit waste to the disadvantage of the remainderman. This article is a detailed guide to Lady Bird Deeds. 

A Lady Bird Deed

A Lady Bird Deed is sometimes called a transfer on death deed or an Enhanced Life Estate Deed, and they refer to the same deed. You should remember that a Lady Bird Deed is not common, but it’s specifically used in a couple of states including Florida.

Ideally, the Lady Bird Deed allows the property to go outside of probate after you pass away. It also offers you, who is the life tenant or estate holder, a chance to change your mind when it comes to who should get the property before you pass away. It also allows you to do whatever you desire with your property without consulting or getting permission from the remainderman. You can even do this by removing their ownership interest. 

Above all, the remainderman tends to have a vested interest, so when they predecease your life, then on your death, the portion of the property of the deceased remainderman has to go to the estate. Simply put, if there are to the remaindermen who have to inherit 50/50 on your death, then once one remainderman dies, the surviving one still has to receive their 50 percent share. Therefore, the other 50 percent can go through probate.

How you can take advantage of Lady Bird Deed

A Lady Bird deed can eliminate or reduce what Medicaid is entitled to when you die. This is called a Medicaid estate recovery of Medicaid lien. After you pass away, Medicaid tends to have an automatic lien on your estate that you leave behind, though this is usually subject to some exceptions. In other words, Medicaid can become a creditor, especially when the Medical recipient dies. 

Take note that you cannot lose your house in Florida. Because of its treasured position, the legislature allows the homeowner several layers of protection against creditors, such as Medicaid. Therefore, you may not require a Lady Bird deed to protect your house. But you can still want to have a deed to avoid probate. 

If you have a vacation house, second home, rental, or any other income-producing property, then they can be subject to Medicaid estate recovery. You should note that all non-homestead real estate tends to be subject to Medicaid estate recovery. Once a recipient of Medicaid dies, their real estate can become part of their estate, so it becomes exposed to creditors, and Medicaid happens to be the largest. In such cases, your lawyer needs to utilize other Medicaid planning methods to get a person who has other real-property holdings to be qualified for Medicaid. And, the Lady Bird Deed is usually the best way that allows your beneficiaries to have the real estate when the Medicaid recipient passes away. 

You also need to keep your property outside of probate so that you can keep it out of reach of Medicaid. You should note that the Lady Bird deed can dictate who can get your property after the recipient of Medicaid dies. The truth is that it cannot become part of the deceased’s estate. Instead, it automatically goes to a person who is a remainderman.

The property owner doesn’t need to have a written permission from the remainderman to sell their real estate properties in the Lady Bird Deed. As a result, the deed can be considered to be an incomplete gift and is not subject to Medicaid transfer of asset penalty.

Sometimes, it’s necessary to avoid probate for many good reasons. Probating an estate can mean that your heirs have to wait longer and even incur extra expenses to get access to what can be theirs in the short run. You can compare a Lady Bird Deed to a pay on death designation on your bank account. 

You should also remember that if the judgment or lien is attached to your property, then a title insurance company can require providing proof of satisfaction or release of judgment in relation to the holder of the life estate to transfer the title during their life. But if the life tenant dies without any conveyance in place and the creditor fails to execute judgement, then it may not be necessary to have satisfaction of lien. 

The Lady Bird Deed’s life tenant can mortgage or convey the fee simple title even if there is a judgment against the remainderman. This happens because the interest of the remainderman can be changed by the life estate holder. Therefore, the remainderman creditors of debts cannot prevent the transfer of the life estate holder. 

In short, you can use the Lady Bird Deed to maintain control of your property, to avoid probate, and retain the benefits of your house. It’s also important to have it because it allows your house to retain its protected status from various creditors.

And, if the deeded property is your house, then there can be no loss of house tax exemption. Even better, the county cannot reassess your property to raise taxes. There are also many other tax benefits when you use a Lady Bird Deed. This includes no extra documentary stamp taxes. 

As you can see, it makes sense to have the Lady Bird Deed. Therefore, you need to contact an attorney who specializes in the Lady Bird Deeds to help you create one. A good attorney can know how to handle your deed so that it meets all your needs.