An enhanced life estate deed, also known as a Lady Bird Deed, has some advantages over a conventional estate plan in certain circumstances.
Making a Lady Bird deed may be a good way to avoid probate and be eligible for Medicaid reimbursement for long-term nursing care if your state permits them.
What Is a Lady Bird Deed?
Only a few states have approved an “enhanced life estate deed,” also known as a Lady Bird deed. To comprehend the distinctive features of a Lady Bird deed, one must first comprehend a conventional life estate.
With a traditional life estate deed, the property owner (the grantor) retains the right to reside on the property until their passing; at that point, the grantee is given ownership of the property.
The grantor of a traditional life estate forfeits the ability to sell or mortgage the property, which is a significant disadvantage.
Additionally, a Lady Bird deed permits the grantor to occupy the property up until their passing before transferring it to the grantee.
The life estate is “coupled with an unrestricted power to convey during the Grantor’s lifetime,” according to a clause in a Lady Bird deed form. It’s crucial to check that the deed complies with state law, though.
States That Allow a Lady Bird Deed
Currently, only Florida, Michigan, Texas, Vermont, and West Virginia are permitted to use Lady Bird deeds.
Approximately half of the U. S. A transfer on death (TOD) or beneficiary deed, which is comparable to and possibly preferable to a Lady Bird deed, is available in states. In the same way that a bank account may have a designated beneficiary, TOD deeds name a beneficiary upon the death of the grantor.
The Purpose of a Lady Bird Deed
A Lady Bird deed and a traditional life estate deed are primarily used to avoid having to go through the probate process after the grantor passes away. Additional benefits of a Lady Bird deed include:
Lady Bird Deeds and Medicaid
If the grantor ever wants to apply for Medicaid to pay for long-term nursing care, a Lady Bird deed may be helpful.
Your assets must be worth less than a certain amount in order to be eligible for Medicaid. Many states permit you to maintain your primary residence and remain eligible.
However, if you use a traditional life estate deed to avoid probate in the five years prior to applying for Medicaid, the value of your home will be considered an included asset and you might not be eligible for Medicaid. Using a Lady Bird deed prevents this from happening because it is not regarded as a transfer.
In order to recoup the benefits paid when a Medicaid recipient passes away, Medicaid may file a claim against the person’s probate estate. The house is not included in the probate estate thanks to a Lady Bird deed, so Medicaid cannot pursue it.
Disadvantages of a Lady Bird Deed
In the following scenarios, a Lady Bird deed might not be the best course of action:
Lady Bird Deeds Compared with Other Documents
In any estate plan, additional types of documents are likely to be taken into account.
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FAQ
What are the disadvantages of a ladybird deed?
- Some title insurance companies might be hesitant to offer title insurance on property covered by a Lady Bird deed if you intend to apply for a mortgage on the property.
- You desire to name multiple grantees as the property’s final owner.
- There is a fairly large mortgage balance on the property.
What are the disadvantages of a Lady Bird deed in Florida?
- Lack of Asset Protection. The property transferred by a lady bird deed, other than a homestead, may be subject to a lien from a current owner’s creditor.
- Constitutional Restrictions. …
- Unexpected Deaths. …
- Changes to the Estate Plan.
Do you pay taxes on a Lady Bird deed in Florida?
When you execute a lady bird deed, there are no documentary stamp taxes due. If you transfer real estate in Florida for any consideration, including the amount of any mortgage on the property, you must pay documentary stamp taxes.
Can a Lady Bird deed be revoked in Florida?
A Lady Bird deed is a life estate and remainder deed with the life tenant, or the deed’s grantor, retaining the right to revoke that designation at any time during their lifetime.