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
Where can I get a Lady Bird Deed
Hi Norma!
Welcome to forums!
You need to contact a local real estate attorney and get the ladybird deed drafted from him. You may get sample ladybird deed form from the given page:
"http://www.docstoc.com/search/sample-florida-lady-bird-deed"
Feel free to ask if you've further queries.
Sussane
Welcome to forums!
You need to contact a local real estate attorney and get the ladybird deed drafted from him. You may get sample ladybird deed form from the given page:
"http://www.docstoc.com/search/sample-florida-lady-bird-deed"
Feel free to ask if you've further queries.
Sussane
where can I find the form?
Hi CathyH,
You can check out the the page mentioned in Sussane's post above. You'll get sample ladybird deed forms from that page.
Thanks,
Jerry
You can check out the the page mentioned in Sussane's post above. You'll get sample ladybird deed forms from that page.
Thanks,
Jerry
Help please... I live with my significant other, and have lived in the same home since we built it in 1992, in NW Florida. The deed is property only , since there never was a loan on anything. Cash was paid to the builder. We are in our 70's now and odds are i will pass first. However, if she goes first, she wishes me to maintain the home until my death, at which time her son will inherit. She wishes to leave some money to me also to pay taxes, insurance, and upkeep until I pass. What kind of paperwork do we need? Standard Life Estate, Quitclaim, or other? Lawyers want a ton of money to handle this.
Welcome mrtony,
Your significant other can sign a warranty deed and transfer the property to the son. In the deed, she should add a life estate clause giving you the authority to live in the property until death. It is always better to take the help of an attorney in order to get the deed drafted and transfer the property to the required person.
Your significant other can sign a warranty deed and transfer the property to the son. In the deed, she should add a life estate clause giving you the authority to live in the property until death. It is always better to take the help of an attorney in order to get the deed drafted and transfer the property to the required person.
Is there a limit to the number of heirs that can be listed on the Lady Bird deed? Can all the children of the parents be listed equally as heirs to the homestead?
Hi gmr,
As far as I know, there is no limit to the number of heirs that can be listed on the ladybird deed. All the children can be listed in the deed and given equal share of the property.
As far as I know, there is no limit to the number of heirs that can be listed on the ladybird deed. All the children can be listed in the deed and given equal share of the property.
what if I prepare a quick claim deed and just don't file it until the person dies? Wouldn't that be better than going through all the hassle of a lady bird deed? This way, the older person still owns their home and can do whatever they want with it, it is protected from the government if they go into a nursing home, and it avoids probate. all the benefits of lady bird without the hassle and expense of hiring a lawyer to write it up.
Hi jim,
A quit claim deed should be recorded immediately after it is signed. If you try to file the deed after the death of the grantor, it may not be considered as a valid deed. Moreover, a quit claim deed will not protect it from the government if the concerned person goes to a nursing home.
Thanks
A quit claim deed should be recorded immediately after it is signed. If you try to file the deed after the death of the grantor, it may not be considered as a valid deed. Moreover, a quit claim deed will not protect it from the government if the concerned person goes to a nursing home.
Thanks
Is this a legal recognized deed type in Michigan? thank you.
Hi pammy!
Welcome to forums!
I don't think ladybird deed is legally recognized in Michigan. However, for better information in this regard, you should contact a local real estate attorney and take his opinion.
Feel free to ask if you've further queries.
Sussane
Welcome to forums!
I don't think ladybird deed is legally recognized in Michigan. However, for better information in this regard, you should contact a local real estate attorney and take his opinion.
Feel free to ask if you've further queries.
Sussane
Yes Lady Bird Deeds are recognized in Michigan. We just did one last week!
can i put a lady bird deed on my home if i have a home equity loan owing on my home?
hi isabelle,
you cannot transfer the property if there is a loan on it. if you want to transfer the property to someone else, you can use a ladybird deed for it but the new owner of the property will have to refinance the loan in his/her name or else the lender will call the loan due immediately.
thanks,
jerry
you cannot transfer the property if there is a loan on it. if you want to transfer the property to someone else, you can use a ladybird deed for it but the new owner of the property will have to refinance the loan in his/her name or else the lender will call the loan due immediately.
thanks,
jerry