By: Rima Suleiman
The lady bird deed is an estate planning tool, allowing Florida residents to transfer property while avoiding probate. Please see below a complete overview of this unique tool.
1, What is a Lady Bird Deed?
The lady bird deed is a type of deed that conveys real property ownership from one party (the Grantor) to another party or parties (the beneficiaries or remaindermen), upon the death of the grantor, without the need for probate.
A lady bird deed is also called an “enhanced life estate deed” because it is a life estate deed with more control. A life estate deed allows an owner to use his/her property during their lifetime, while giving away ownership of the property after death. The property interest kept during the owner’s life is called a “life estate,” and the property interest given away is called a “remainder.” After the owner dies, the person with the remainder becomes the full owner of the property.
The big advantage of a traditional life estate deed is that it avoids probate. The remainder beneficiary does not have to wait for a court to approve the transfer after death; rather, the whole transfer is automatic. This makes life estate deeds incredibly useful for estate planning because it makes things easier for the owner’s loved ones after he/she passes. However, there is also a big disadvantage to a traditional life estate deed; the future owner or beneficiary is a co-owner with the life tenant. Because of this co-ownership, the grantor cannot deal with the property as they see fit; they require the co-owners’ approval.
A lady bird deed solves the big problem of life estate deeds. The “enhancement” is that the person keeping the life estate retains complete ownership of the property. He/she can do as they please with the property without the involvement of the remainder beneficiary, including the right to change the beneficiaries as he/she wishes, sell the property, and/or mortgage it. The lady bird deed accomplishes this by not allowing the remainder beneficiary’s title to vest until the death of the grantor.
. 2. Does a Lady Bird Deed Avoid Probate?
Yes, similar to the life estate deed, the lady bird deed will let you avoid the probate court in Florida. When you pass away, your interest in the property goes away and the person you list as a beneficiary on the deed gains full ownership of the property outside of the probate code.
Avoiding probate also allows the property to pass without involvement from the personal representative of the estate. This can alleviate a lot of frustration on the part of the beneficiary of the property. It can also save money, as probate can be a costly process.
However, if your main goal in using a lady bird deed is to avoid probate, you should take steps to ensure that the deed is drafted properly. Incorrect drafting can cause many problems, and without proper planning, this occurrence could result in the property still needing to be probated.
3. Is a Lady Bird Deed Revocable?
Yes, a lady bird deed can be revoked during the property owner’s lifetime. The lady bird deed expressly reserves the owner’s right to convey the property. To revoke a lady bird deed, all the owner needs to do is to validly execute a new deed. Thus, the new deed will extinguish the interest created by the old lady bird deed.
4. What Happens to a Lady Bird Deed After Death?
After the grantor of a lady bird deed dies, the property automatically transfers to the beneficiary listed on the deed. The beneficiary then owns the property. This transfer occurs without any probate of the property.
5. Does a Lady Bird Have to be Recorded?
The state of Florida does not require these deeds to be recorded. However, it is standard practice, and for good reason. In Florida, when a deed is recorded by the clerk of court, it is presumed to be delivered properly. This presumption is a requirement to have a valid deed. Without that validity, the deed could be challenged, resulting in massive consequences.
6. Does a Lady Bird Deed Affect the Florida Homestead Exemption?
No, it does not. The grantor maintains his/her Florida homestead tax exemption after executing a lady bird deed.
7. Does a Lady Bird Deed hinder Medicaid eligibility?
No, it does not. Since the transfer of the property owned does not occur until the grantor’s passing, it is not considered a gift that would hinder Medicaid eligibility.