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 Jerry, After reading through the thread it appeared that the LBD wouldn't affect title transfer until the death of the grantor. If this is accurate, then why would a mortgage holder call the loan during the lifetime of the borrower? Is there a rule in the statutes that prohibit LBD's for property with existing loans? Are there resources on the web for California Statute citation?
Thank You,
Gabe
Thank You,
Gabe
As far as I can understand, though the borrower retains the life estate rights to the property, the new owners are added to it. In that case, the lender can ask the new owners of property to refinance the loan.
Does Michigan recognize this instrument?
Hi gdllhh!
Welcome to forums!
A Ladybird Deed is recognized in Michigan. You should contact a real estate attorney and he would help you in drafting the deed.
Feel free to ask if you've further queries.
Sussane
Welcome to forums!
A Ladybird Deed is recognized in Michigan. You should contact a real estate attorney and he would help you in drafting the deed.
Feel free to ask if you've further queries.
Sussane
My mother is moving to a patio home near us. How can we protect her new asset so that in the event she has to go to assited living in the future the government cannot force us to sell the property to satisfy assisted living costs above what medicare provides? Also, can this be done and allow her to also get the homestead exemption for county property taxes?
Hi rmc!
Welcome to forums!
Your mother can transfer the property to you using a ladybird deed and you can live in that property in order to save it from any kind of liens. She can add a life estate clause in the deed which will help her in staying in the property until death. However, if the property is in your name, then your mother cannot claim homestead exemptions.
Feel free to ask if you've further queries.
Sussane
Welcome to forums!
Your mother can transfer the property to you using a ladybird deed and you can live in that property in order to save it from any kind of liens. She can add a life estate clause in the deed which will help her in staying in the property until death. However, if the property is in your name, then your mother cannot claim homestead exemptions.
Feel free to ask if you've further queries.
Sussane
Can I create a Lady Bird Deed on my home if it is currently morgtaged?
Hi JLM!
Welcome to forums!
Though there is a mortgage on the property, you can draft a ladybird deed and transfer the property to someone else. However, that person will have to refinance the mortgage in his or her name.
Feel free to ask if you've further queries.
Sussane
Welcome to forums!
Though there is a mortgage on the property, you can draft a ladybird deed and transfer the property to someone else. However, that person will have to refinance the mortgage in his or her name.
Feel free to ask if you've further queries.
Sussane
Thank you Sussane. I assume the Mortgage company has to approve the deed?
Hi JLM,
You will have to inform the mortgage company after you transfer the property. As Sussane has suggested, the lender will ask the new owner to refinance the mortgage.
Thanks
You will have to inform the mortgage company after you transfer the property. As Sussane has suggested, the lender will ask the new owner to refinance the mortgage.
Thanks
smithsussane and jameshogg
I OWN MY SISTERS HOME & PROPERTY BUT THERE IS A 'LIFE ESTATE' NOW SHE IS CONFINED TO A NURSING HOME AND WILL NEVER RETURN TO THE HOME AND PROPERTY
My situation may be unique. I am separated from my wife (not a legal separation). We are, however, on good terms and she is still the primary beneficiary to all my other assets. If I want my condo passed to her, which I own individually free and clear, is the lady bird deed the best option. I would like the option to sell the condo at some point if I decide to.
Hi!
Welcome to forums!
To NONA,
After your sister's death, the life estate clause will become null and void and you will become the owner of the property.
To Tracer,
As your property is free and clear, you can use a warranty deed in order to transfer the condo to your ex-wife.
Feel free to ask if you've further queries.
Sussane
Welcome to forums!
To NONA,
After your sister's death, the life estate clause will become null and void and you will become the owner of the property.
To Tracer,
As your property is free and clear, you can use a warranty deed in order to transfer the condo to your ex-wife.
Feel free to ask if you've further queries.
Sussane
would a lady bird deed be appropriate for my parent home in michigan. they are 82 & 83 years old; my father has recently July 2010 gone into a nursing home and is applying for medicaid thank you