Lady Bird Deeds
Mortellaro Law—Your Trusted Elder Law and Estate Planning Attorneys in Tampa, Florida
In some situations, an enhanced life estate deed, also known as a Lady Bird Deed, provides advantages over a traditional estate plan.
What is a Lady Bird Deed?
A Lady Bird Deed, also known as an enhanced life estate deed, is a unique estate planning tool that allows property owners to transfer their property to their heirs while retaining full control and ownership during their lifetime. This type of deed provides an effective way to avoid probate, reduce estate taxes, and protect the property from potential creditors.
The name “Lady Bird Deed” originated from a 1980s legal case in which President Lyndon B. Johnson’s attorneys drafted the deed to transfer property to his wife, Claudia “Lady Bird” Johnson. The deed allowed the property to pass to their children upon Lady Bird’s death without needing probate. Due to the prominence of the former First Lady, the name “Lady Bird Deed” became popular and is still used today for this type of document, even though it’s not an official legal term.
Why Choose a Lady Bird Deed?
There are several compelling reasons to consider a Lady Bird Deed:
- Retain Control: As the property owner, you maintain full control over the property during your lifetime. You can sell, modify, or even revoke the deed at any time without needing consent from the beneficiaries.
- Avoid Probate: Upon your passing, the property automatically transfers to your beneficiaries, bypassing the lengthy and often costly probate process.
- Asset Protection: A Lady Bird Deed can protect your home from being claimed by creditors.
- Tax Benefits: This deed allows your beneficiaries to receive a “step-up” in basis, potentially reducing capital gains tax when they sell the property after your passing.
Lady Bird Deed FAQs
A Lady Bird Deed, also known as an enhanced life estate deed, allows property owners to transfer their property to heirs while retaining full control during their lifetime. Unlike a traditional deed, which transfers ownership immediately, a Lady Bird Deed lets you maintain the right to sell, modify, or revoke the deed at any time without needing consent from beneficiaries.
The benefits of a Lady Bird Deed include:
- Retaining Control: You keep full rights to your property while you’re alive.
- Avoiding Probate: The property automatically transfers to your heirs upon your death, bypassing probate.
- Asset Protection: It can help shield your home from creditors.
- Tax Benefits: Beneficiaries may receive a step-up in basis, which can reduce capital gains tax upon selling the property.
Yes, a Lady Bird Deed can be advantageous for those seeking Medicaid coverage for long-term care. It allows property owners to retain their primary residence while potentially qualifying for Medicaid. Unlike traditional life estate deeds, Lady Bird Deeds are not considered asset transfers, which means they can help avoid disqualification when applying for Medicaid benefits.
While Lady Bird Deeds offer many advantages, they may not be suitable in all situations. If you have a significant mortgage on the property or intend to pass the house to multiple beneficiaries who may not get along, this deed could create complications. Additionally, Lady Bird Deeds do not address issues related to beneficiaries’ descendants who may pass away before you.
At Mortellaro Law, our experienced attorneys provide personalized legal services to assist you in creating a Lady Bird Deed. We guide you through the entire process, starting with a thorough consultation to understand your goals. We prepare the deed in compliance with Florida laws, assist with its execution and recording, and remain available for any future questions or estate planning needs.
If you have a significant unpaid mortgage or lien on the property, or if you want to pass the house to multiple people, a Lady Bird deed could lead to complications. This is especially true if the potential beneficiaries do not get along and cannot cooperate to sell the property after your passing.
In such cases, a trust might be a better choice than a Lady Bird deed, as it offers more flexibility in selling the property.
Untimely Beneficiary Deaths
Lady Bird deeds do not account for beneficiaries’ descendants who might pass away before you. A living trust enables you to appoint a successor trustee and a backup beneficiary. If the backup beneficiary is a close relative, it might also help reduce property taxes.
How Mortellaro Can Help
At Mortellaro Law, we understand that every situation is unique. Our team, recognized as Florida’s highest-rated elder law and estate planning attorneys, is dedicated to providing personalized legal services tailored to your specific needs. We will guide you through the process of creating a Lady Bird Deed, ensuring that your legal documents reflect your wishes and that you fully understand the implications.
Our Process
- Consultation: We begin with a thorough consultation to understand your goals and circumstances. This discussion helps us determine if a Lady Bird Deed is the right choice for you.
- Document Preparation: Our experienced attorneys will prepare the Lady Bird Deed, ensuring it complies with Florida laws and effectively incorporates your intentions.
- Execution and Recording: Once you have reviewed and approved the documents, we assist with the execution and proper recording of the deed with the county clerk.
- Ongoing Support: Following the execution of the deed, our team remains available to address any questions or future estate planning needs that may arise.
Lady Bird Deeds and Medicaid
A Lady Bird deed can be beneficial if the grantor wants to potentially qualify for Medicaid in the future to cover long-term nursing care. To be eligible, your assets must be below specific limits, and many states allow you to retain your primary residence while still qualifying.
However, if you use a traditional life estate deed in the five years before applying for Medicaid to bypass probate, the home’s value becomes part of your assets, possibly leading to disqualification.
This issue does not arise with a Lady Bird deed, as it is not treated as a transfer. Upon the death of a Medicaid recipient, the agency may claim against the probate estate to recover benefits paid. Since a Lady Bird deed avoids probate, the home does not become part of the probate estate, and Medicaid cannot claim it as an asset.
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