Posted in Asset Protection,Probate & Trust Administration,Real Estate Law,Wills, Trusts & Estate Planning

What is a Lady Bird Deed?

A Lady Bird Deed, also known as an Enhanced Life Estate Deed, is a unique type of deed recognized in Florida. It allows property owners to retain control over their real property during their lifetime while designating a beneficiary to inherit the property upon their death, without the need for probate.

How Does a Lady Bird Deed Work?

With a Lady Bird Deed, the property owner (grantor) retains a life estate in the property, meaning they have the right to use, occupy, and control the property for the rest of their life. The grantor also retains the right to sell, mortgage, or otherwise dispose of the property without the consent of the remainder beneficiaries. Upon the grantor’s death, the property automatically transfers to the designated beneficiaries (remaindermen) without going through probate. Although, note that documents such as a death certificate need to be later recorded in order to “clear title” to the beneficiaries.

Benefits of a Lady Bird Deed

1. Avoids Probate: One of the primary advantages of a Lady Bird Deed is that it allows the property to pass directly to the beneficiaries without the need for probate, saving time and money.
2. Retains Control: The grantor retains full control over the property during their lifetime, including the right to sell or mortgage the property as well as to change the beneficiaries (remaindermen).
3. Medicaid Planning: In Florida, a Lady Bird Deed can be a useful tool for Medicaid planning. The property is not considered a countable asset for Medicaid eligibility purposes, and it can avoid Medicaid estate recovery after the grantor’s death.
4. Tax Benefits: Beneficiaries receive a step-up in basis for capital gains tax purposes, which can reduce the amount of capital gains tax owed if the property is sold.

How to Create a Lady Bird Deed in Florida

Creating a Lady Bird Deed involves several steps:

1. Drafting the Deed: The deed must be carefully drafted to include the necessary language to create an enhanced life estate.
2. Executing the Deed: The deed must be signed by the grantor in the presence of two witnesses and a notary public.
3. Recording the Deed: The executed deed must be recorded in the public records of the county where the property is located.

Potential Drawbacks

While Lady Bird Deeds offer many benefits, there are some potential drawbacks to consider:

• Complexity: Drafting a Lady Bird Deed requires precise language and an understanding of legal principles, so it’s advisable to seek legal assistance.
• Medicaid Rules: Medicaid rules can change, and what works today may not be effective in the future.
• Limited Availability: Not all states recognize Lady Bird Deeds, so this tool is not available everywhere.
• Overly Simple & Alternatives: Most importantly, a Lady Bird Deed is overly simple and often does not cover scenarios such as a beneficiary or remainderman not surviving you or being disabled. In comparison, a Will or Trust can cover more contingent scenarios and is often a more thorough and better choice. Nonetheless, if Medicaid planning is needed or for individuals with lower net worth and solid beneficiaries who should also receive the real property outright, a Lady Bird Deed can be a useful vehicle or option within your estate plan.

Conclusion

Lady Bird Deeds can be a powerful estate planning tool for certain Florida residents, offering a way to avoid probate, retain control over property, and potentially benefit Medicaid planning. However, it’s important to consult with an experienced estate planning attorney to ensure that a Lady Bird Deed is the right choice for your specific situation.