An enhanced life estate deed, which is commonly referred to as a “Lady Bird Deed,” allows someone to name a beneficiary to receive their real estate when they die, while retaining all of the rights they had in the property before creating a Lady Bird Deed.
A Lady Bird Deed allows your property to transfer to the person or people you name when you die, without going through probate, and you keep the right to rent, sell, refinance, or modify your property without getting the beneficiary’s consent. You also keep the power to change who you have named as the beneficiary and the power to revoke the Lady Bird Deed entirely.
Some highlighted advantages of a Lady Bird Deed include:
- Automatic transfer at death (avoids probate).
- Allows for flexible planning.
- Maintains Florida Homestead protections.
- Maintains Medicaid eligibility without transfer penalties.
- Potentially lowers your beneficiary’s tax burden if they choose to sell the property after your death.
Advantages of a Lady Bird Deed
- Avoids Probate For Real Estate
The property immediately passes to your named beneficiary when you die. Since this transfer is automatic, it avoids probate, which can reduce legal costs, avoid delays, and simplify matters for your loved ones. - Flexibility and Control During Your Lifetime
You never know exactly how your life will unfold, but a Lady Bird Deed allows you to make changes to your property and to your beneficiaries as situations and circumstances change during your life. Lady Bird Deeds provide significant flexibility for planning purposes and retain all of the rights you already have in your property, so you can continue to do what you want with your real estate, without needing the beneficiary’s consent. - Maintains Homestead Protections
The property retains its Florida homestead tax exemption and creditor protections as long as it remains your primary residence and complies with family survivor restrictions. - Does Not Trigger Medicaid Transfer Penalties
Because you retain control, the property covered by your Lady Bird Deed is not considered a completed gift. This avoids penalties under Medicaid’s five-year look-back for long-term care eligibility. - Allows for a Step-Up in Basis for Tax Purposes
Since the transfer does not occur until you pass away, your beneficiary inherits the property with a cost-basis equal to its market value at the time of your death, rather than what you paid for the property. This may reduce your beneficiary’s capital gains taxes if or when they decide to sell the property.
Considerations Before Using Lady Bird Deeds
- Lady Bird Deeds only cover real estate, so you will need to incorporate separate planning tools for bank accounts, investments, and personal property.
- Florida’s Homestead rules may override your Lady Bird Deed if you have a spouse or minor child.
- Even if you name someone else as the beneficiary in your Lady Bird Deed, Florida law may prevent that transfer if you are married or have a minor child when you pass away. In that case, your spouse or child may have legal rights to the property that take priority. This can interfere with your estate plan as a whole.
- Even if you name someone else as the beneficiary in your Lady Bird Deed, Florida law may prevent that transfer if you are married or have a minor child when you pass away. In that case, your spouse or child may have legal rights to the property that take priority. This can interfere with your estate plan as a whole.
- Title companies and lenders may hesitate to approve refinancing or sales; some may require the remainder beneficiaries to sign off.
- If your beneficiary has creditors, the beneficiary’s interest could be subject to liens after your death. Different courts have treated remainder interests differently.
- A Lady Bird Deed does not cover incapacity planning. To manage your finances if you become unable to do so yourself, include a durable power of attorney in your estate plan or consider using a trust.
Who May Benefit From Lady Bird Deeds
- Property owners whose primary goal is to ensure their home transfers smoothly to their beneficiaries without going through probate.
- Individuals who want to preserve their Homestead protections and Medicaid eligibility.
- Anyone interested in a straightforward, low-maintenance estate planning tool to transfer their real estate when they die.
When a Lady Bird Deed May Fall Short
- Individuals who have significant non-real-estate assets, closely held business interests, real estate outside of Florida, or need to provide for posthumous financial management are going to be served by utilizing trusts.
- Planning layered or phased inheritance (e.g., providing for contingencies if a beneficiary predeceases you).
- If you prioritize confidentiality, since deeds are recorded in the public records. Trusts allow for more privacy since they almost never need to be recorded.
Cobb Cole’s Estate Planning group can help you define your goals and incorporate a Lady Bird Deed into your estate plan if appropriate.
