What is a Lady Bird deed?
A “Lady Bird Deed” is a way to transfer property to someone else outside of probate while retaining a life estate in the property. This type of deed got its nickname when President Lyndon B. Johnson used it to convey the property to his wife, Lady Bird Johnson.
Under Florida law, a special type of deed exists that is used to avoid probate. Probate is the legal process by which the assets of a deceased person are properly handed out to his or her heirs or beneficiaries. The probate process is generally necessary, with few exceptions, whether, or not the person has a will. Often referred to as an enhanced life estate deed, a “Lady Bird deed” is a somewhat new form of transferring title of real estate. Just like a traditional life estate deed, a Lady Bird deed allows property to automatically pass to one or more designated recipients upon the owner’s death- and avoid the lengthy and costly probate process. Florida is among a small number of states that recognize a Lady Bird deed.
Lady Bird Deed: The Basics
In a traditional life estate deed, an owner may name a beneficiary to inherit property while still keeping ownership during his or her lifetime. There are, however, significant restrictions such as losing the right to sell or mortgage the home and the possibility of being liable to the beneficiary if the owner allows the property to greatly decrease in value. A Lady Bird deed can be a simple way to transfer property upon your death and avoid probate. Unlike a traditional life estate deed, a Lady Bird deed allows the owner to:
· Maintain the right to sell the property at any point in time
· Maintain the right to use and profit from the property during his or her lifetime
· Avoid the risk of making a gift that may be subject to federal gift taxes
· Evade losing eligibility for Medicaid; and
· In some states, prevents the home from being sold even after the owner’s death, to repay costs of Medicaid services received
Disadvantages of a Lady Bird Deed
Generally, life estate deeds – traditional and Lady Bird – are often used in estate planning to avoid the creation of a will or trust. Under these plans, children or other beneficiaries are referred to as remaindermen. Under a traditional life estate, if the remaindermen die before the owner does there are no remaindermen to take title of the property without going through probate. Should the owner fail to have a will, the property would then pass-through Florida’s intestate laws and possibly end up in the hands of relatives against the owner’s wishes.
Under a Lady Bird deed, the same scenario would have identical results. There are other issues that may come up with a Lady Bird or life estate deed, such as refusal by the title insurer to insure the property if the remaindermen listed does not include all of the owner’s children. This may occur because the title company would expect a challenge to the way the property is titled when one child is favored over another. Finally, if a remaindermen has debt that results in a creditor claim or a judgment this may attach to the property immediately even if he or she has not taken title.
Florida Real Estate Help
In order to be valid and effective, a Lady Bird deed must meet all of the requirements under Florida law. While it is an option for those wishing to avoid probate it does not solve all of the issues that come with a life estate deed. For these reasons, a knowledgeable will, trusts and probate attorney should be contacted if you or someone you know has questions about Lady Bird deeds or any other real estate matters.
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