Enhanced life estate deeds, also called Lady Bird deeds, can be a great tool to transfer ownership of real property at death outside of probate. This type of deed got its nickname when President Lyndon B. Johnson used one to convey property to his wife, Lady Bird.
Florida Today’s recent article entitled, “Real estate transfers: Is a ‘Lady Bird deed’ right for me?” explains that Lady Bird deeds are a type of life estate deed designed to automatically transfer property ownership upon the death of the original owner to another individual. However, they don’t require the original owner to give up use, control, or ownership of the property while alive.
The beneficial receiver of the property upon death doesn’t get any immediate rights or ownership interests in the property. Their consent isn’t needed to sell, convey, or change the use of the property while the original owner is alive. The Lady Bird deed is rendered obsolete if the original owner sells or conveys the property in their lifetime. However, if the original owner passes away, the property subject to the Lady Bird deed is automatically conveyed to the beneficial recipient without needing to pass through probate.
With a traditional Life Estate deed, the original owner must give up control when adding a beneficial recipient. This means the original owner is prohibited from selling, conveying, or encumbering the property without explicit consent from the beneficial recipient. The original owner also can’t change or end a traditional Life Estate deed without consent from the beneficial recipient.
Here are the benefits of a Lady Bird deed:
- Properties can be conveyed at death without having to pass through probate.
- The original owner remains in full control of the property while they’re alive.
- Recording a Lady Bird deed doesn’t impact the current owner’s homestead protection and exemptions.
- Any property subject to a Lady Bird deed doesn’t violate Medicaid’s five-year look-back period and isn’t subject to gifting taxes or penalties, since the beneficial owner doesn’t immediately possess any ownership rights.
Here are the downsides of a Lady Bird deed:
- Doesn’t circumvent the Florida statute that requires homestead property to be conveyed first to a surviving spouse or minor children.
- Doesn’t protect non-homestead properties from any judgment liens issued against the original owner during their lifetime.
A Lady Bird deed can be an effective tool to transfer real property outside of probate. However, as in any real estate transaction or estate planning endeavor, it is necessary to have a knowledgeable estate planning attorney to discuss your desired outcome and best course of action for your specific situation. If you would like to learn more about real property and estate planning, please visit our previous posts.
Reference: Florida Today (June 9, 2023) “Real estate transfers: Is a ‘Lady Bird deed’ right for me?”
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