What is a Lady Bird Deed?
There are many forms of estate deeds, and one that seems to be gaining popularity that you may have heard mentioned recently is a Lady Bird deed. A Lady Bird deed, also known as an enhanced life estate deed, is a deed that forgoes the need for a Florida probate and lets your property pass automatically to your intended recipient or recipients. The grantor first signs a deed to their grantee while still holding onto the right to sell, manage, use, or otherwise control the property during the grantor’s life. When the grantor passes away, the grantee then accesses the land records to file the grantor’s death certificate. This serves as proof of death, and the property is then passed on directly without a probate’s presence.
One major perk of opting for an enhanced life estate deed in favor of the more traditional life estate deed is that the grantor maintains authority over the property while they’re still alive. Traditionally, once a life estate deed is filed, the grantor no longer has the ability to change his mind about the future of the property. Instead, it is “spoken for,” as the grantor can no longer sell, convey, gift, terminate, mortgage, or otherwise alter the arrangement without the grantee’s permission.
Lady Bird deeds are similar in that they allow the grantor to convey the property in the future while maintaining a life estate; an enhanced life estate deed also allows the grantor complete and normal control over the property for the remainder of their lifetime. The property may be used, occupied, mortgaged, or otherwise maintained without the grantee’s consent or remaining beneficiaries. Additionally, the typical life estate deed may be required to pay a gift tax when transferring the interest remainder. This is another area where Lady Bird deeds differ, as the grantor of a Lady Bird deed will not be required to make this payment because the grantor still has the right to cancel the arrangements made for the beneficiary.
Is There Anything To Know Ahead of Time?
Lady Bird deeds do not have tax consequences, and there isn’t a completed gift as far as estate taxes are concerned. After your death, your property is given to the beneficiary in a way that allows them to sell the property tax-free. Grantors also maintain their homesteads for property tax purposes. Additionally, traditional life estate deeds tend to invoke a waiting period of five years for Medicaid benefits. Enhanced life estate deeds do not have this caveat, as no transfer of ownership takes place as far as Florida Medicaid is concerned because the gift can always be revoked.
Additionally, while you can usually do whatever you like with the property once you’ve established an enhanced life estate deed, there are some banks that won’t allow a mortgage on a property entered into an enhanced life estate deed. Therefore, if you’ve been thinking about refinancing your home, you may want to consider other options. A real estate attorney can help you fix problems like these. Still, you can also avoid the unwanted headache by considering other options – Such as a revocable living trust – Ahead of time.
If you’re interested in learning more and finding out which option may be right for you, contact us at Dowd Law, and we’d be happy to sit down with you and go over your estate planning options.