Posted on: 29th Dec, 2006 12:07pm
Lady bird deed or Enhanced life estate deed is a legal document using which you can transfer property to your heirs while at the same time retaining a life estate along with the right to sell property in your lifetime. This implies that you will own the property till you die and if you'd like to sell, there's no need to notify your beneficiaries. Upon your death, your heirs or beneficiaries named on the deed will be able to take over the property without having to go through probate.
In which states is the deed applicable?
The enhanced life estate deed is acceptable in states like Florida, Texas, Ohio, California, and Kansas.
How does lady bird deed differ from life estate?
There are 2 ways in which an enhanced life estate differs from a regular life estate deed:
- Property sale: Unlike a ladybird deed which allows a grantor to sell property during his lifetime without the beneficiaries' consent, a regular life estate deed is one which doesn't allow you to sell without permission.
- Gift tax implications: A regular life estate allows the grantor to keep a life estate and transfer a remainder interest (estate that remains after grantor's death) to one who'll inherit property. The current owner has the right to occupy and use property. He is entitled to get all the money that can come from his property. But as per IRS rules, the grantor may have to pay gift taxes for transferring the remainder interest.
However, the grantor need not pay gift taxes if he uses a ladybird or enhanced life estate deed. This is so because the grantor has the unilateral right to cancel the remainder interest conveyed to the beneficiary.
How does one benefit from using lady bird deeds?
- Avoid probate: Unlike a Will that requires to be probated, a lady bird deed helps in conveying title without any probate at the time of the grantor's death.
- Protect from creditors: It protects the property from the beneficiaries' creditors during the grantor's lifetime. The creditors cannot place a lien on the property because the beneficiaries have no interest during the grantor's lifetime.
- No capital gains tax: The beneficiaries inherit property at a "stepped-up" basis, which is the value of the property on the day when the grantor passes away. If the beneficiary sells home, obviously there will be no capital gains and hence the grantee does not have to pay capital gains tax.
- Flexible rights: The grantor is legally entitled to sell or transfer property as a gift any time he wishes to do so. He may also take out a mortgage on the property or cancel the remainder interest.
Does ladybird deed affect Medicaid eligibility?
Using ladybird or enhanced life estate deed doesn't make you ineligible for Medicaid as long as you express your "intent to return" after being taken to nursing home. The "intent to return" can be expressed in the form of an affidavit or letter signed by you. Even if you do not express the "intent to return", your home may be considered as an exempt asset for Medicaid eligibility as long as your spouse or relative occupies it when you're not around. Check out if Ladybird deed causes Medicaid penalty.
Which is better - Ladybird deed or quitclaim?
Unlike ladybird deeds, a quitclaim with life estate does not allow the grantor to sell, mortgage or transfer property without the consent of the beneficiaries. The beneficiaries' creditors can easily place a lien on the property as the beneficiaries cannot claim the home as their homestead property. Moreover, if any beneficiary passes away or goes through divorce, his spouse can claim a share of interest in property. In some states, the quit claim or a life estate can even affect the validity of your homestead protection.
Using ladybird deeds make sense if you wish to convey property to your heirs directly without having to prepare a Will. In most cases, it may not affect your Medicaid eligibility. And, the deed offers maximum benefit to your beneficiaries when they take over your property.
Using ladybird deeds make sense if you wish to convey property to your heirs directly without having to prepare a Will. In most cases, it may not affect your Medicaid eligibility. And, the deed offers maximum benefit to your beneficiaries when they take over your property.
I have heard that lady bird deed can be used to avoid probate but not aware of the actual procedure for it. please help
Hi Lesia,
Refer this thread http://www.mortgagefit.com/know-how/addsiblings-ladybirddeed.html to get the discussion.
Refer this thread http://www.mortgagefit.com/know-how/addsiblings-ladybirddeed.html to get the discussion.
Hello Lesia,
It actually depends on your parents. If they are willing to list all three siblings on the deed, then that should be done.
It actually depends on your parents. If they are willing to list all three siblings on the deed, then that should be done.
What about the IRS treatment using the analogy of a revocable trust. For estate tax purposes, a revocable trust (I think) does not remove the asset from the giver's estate because the giver retained control over the asset. Is this a concern for a Lady Bird Deed?
Hello Joe,
As far as I know, the property still remains in the owner's estate for the estate tax purposes even after it has been transferred with a ladybird deed.
As far as I know, the property still remains in the owner's estate for the estate tax purposes even after it has been transferred with a ladybird deed.
my husband was deeded acreage that includes realestate and his mother house, she found out that she would lose the homestead on her taxes if she left it in his name. The lawyer corrected the deed with a correction warranty laby bird deed, this does not specify house and 1 acre only. Does it include all 70 acres and other improvements.
Hi Kimjw,
Welcome to our community forums.
As per the laws on homestead, when a property is transferred to someone, the current owner qualifying for homestead protection may lose it on account of change in the title.
Now if the lawyer has corrected the deed by excluding the house from it, then your husband won't get the house. Rather he will get other properties as stated on the deed. You need to check out the property description part of the deed.
Since there has been a change done on the deed, therefore the deed should be filed again to reflect the change.
"Does it include all 70 acres and other improvements."
I did not get this part of your query. What exactly are you trying to say here? What does this 70 acre include?
Regards,
Jessica.
Welcome to our community forums.
As per the laws on homestead, when a property is transferred to someone, the current owner qualifying for homestead protection may lose it on account of change in the title.
Now if the lawyer has corrected the deed by excluding the house from it, then your husband won't get the house. Rather he will get other properties as stated on the deed. You need to check out the property description part of the deed.
Since there has been a change done on the deed, therefore the deed should be filed again to reflect the change.
"Does it include all 70 acres and other improvements."
I did not get this part of your query. What exactly are you trying to say here? What does this 70 acre include?
Regards,
Jessica.
My mother is in long term care. She is under Medcaid. I have Lady Bird Deed on her house. I also have Durable POA. If necessy, Can I sell her house before her passing?
My Dad is in the nursing home in TX. We have gotten a Ladybird deed for his (only possession) his home. When applying for Medicaid - his application will be denied UNLESS we sign the paperwork acknowledging that "the state of Texas has the right to ask for some money back from your estate after you die." It is my understanding that the state cannot file against the estate if there is ladybird deed. Is this true? Are the house and properties protected from Medicaid Recovery?
Hi Jacksonville,
Welcome to the forum.
I think you cannot sell the house as your mother has a Ladybird deed. But your mother can sell the house. She possesses all the rights of the house until her death.
After her death the grantor that means you will own the house. Ladybird deed is mainly used to avoid the costly and time consuming probate process.
Feel free to ask if you have any further questions.
Best of luck,
Larry
Welcome to the forum.
I think you cannot sell the house as your mother has a Ladybird deed. But your mother can sell the house. She possesses all the rights of the house until her death.
After her death the grantor that means you will own the house. Ladybird deed is mainly used to avoid the costly and time consuming probate process.
Feel free to ask if you have any further questions.
Best of luck,
Larry
Hi Sandy,
Welcome to the forum.
As you have signed the agreement, the state can ask the money back in the form of Medicaid Recovery. You have the Ladybird deed. So you can avoid the probate but you are still entitled to pay off the money for Medicaid Recovery.
Best of luck,
Larry
Welcome to the forum.
As you have signed the agreement, the state can ask the money back in the form of Medicaid Recovery. You have the Ladybird deed. So you can avoid the probate but you are still entitled to pay off the money for Medicaid Recovery.
Best of luck,
Larry
my sister is listed as co owner of a home in S Carolina. It is mortgage free, and her husband is dying of cancer. They have no health or life insurances to speak of. How can she avoid losing the home because of medicaid or hospital bills.
You sister can use a Ladybird deed. Thus she will get the property after her husband's death and also her husband can get the Medicaid benifits. but as everyone suggests, attorney's advise should be taken before using the Ladybird deed.
How Can I get A Lady Bird Deed ? Thank U
Hi Jon,
I've already replied to your query at http://www.mortgagefit.com/propertytransfer/ladybird-deed.html#56986 .
I've already replied to your query at http://www.mortgagefit.com/propertytransfer/ladybird-deed.html#56986 .
Will I be able to maintain my homestead exemption in Texas.