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
is this form legal if the property owner fills out and has notorized.
Hi mrs mrak,
You will have to check out whether or not the ladybird deed is valid in Michigan. You can contact a real estate attorney and he will be able to help you in this matter. If it's valid, then your parents can transfer the property to you.
To djandray,
You need to check out whether or not the deed is valid in Texas. If not, then though the property owner fills out and has it notarized, the deed won't be considered as valid.
Thanks
You will have to check out whether or not the ladybird deed is valid in Michigan. You can contact a real estate attorney and he will be able to help you in this matter. If it's valid, then your parents can transfer the property to you.
To djandray,
You need to check out whether or not the deed is valid in Texas. If not, then though the property owner fills out and has it notarized, the deed won't be considered as valid.
Thanks
My Mother had a Lady Bird Deed on her house and just passed away in May - we have just sold the house - do we have to claim this on our 2010 income taxes?
Hi Guest,
If you were the owner of the property and if you've received the sale proceeds, then you will have to claim it on your taxes.
Thanks
If you were the owner of the property and if you've received the sale proceeds, then you will have to claim it on your taxes.
Thanks
Is there any chance that this type of deed will be legal in Utah?
What if the grantor must go on medicade? Must she sell her home (homestead property) or will it be safe from creditors?
Hi Susanne,
As far as I know, ladybird deed is not valid in Utah. Nevertheless, you should speak to an attorney and take his opinion in this matter. He will be able to help you in a better manner.
To Guest,
If the grantor sells off the property, then he or she won't be able to receive the Medicaid benefits for the next 5 years as Medicaid has a look back period of 5 years.
Thanks,
Jerry
As far as I know, ladybird deed is not valid in Utah. Nevertheless, you should speak to an attorney and take his opinion in this matter. He will be able to help you in a better manner.
To Guest,
If the grantor sells off the property, then he or she won't be able to receive the Medicaid benefits for the next 5 years as Medicaid has a look back period of 5 years.
Thanks,
Jerry
My son died and the mortgage on the home is $196,000, only his name was on the mortgage. I received $140,000 in Insurance. His estate has gone into probate now with me appointed as personal Representative. Do you have any suggestions for me, I am 82 years old.
Will a Lady bird deed work for me?
hi maylee!
welcome to forums!
as the estate has gone into probate, you should contact a real estate attorney and take his help in getting the property transferred in your name. once you do so, then you can refinance the mortgage in your name, pay the dues and save the property.
feel free to ask if you've further queries.
sussane
welcome to forums!
as the estate has gone into probate, you should contact a real estate attorney and take his help in getting the property transferred in your name. once you do so, then you can refinance the mortgage in your name, pay the dues and save the property.
feel free to ask if you've further queries.
sussane
are they legal in Michigan
Hi madad,
As far as I know, ladybird deed is not legal in Michigan. Nevertheless, you should contact a Michigan based attorney and take his opinion in this matter.
Thanks
As far as I know, ladybird deed is not legal in Michigan. Nevertheless, you should contact a Michigan based attorney and take his opinion in this matter.
Thanks
Mother executed a Lady Bird deed with my brother and his current wife as the receipent, however my brother is recently deceased. How can this deed be revoked?
Welcome iraqt,
Your brother's wife will have to file an affidavit of heirship and remove your deceased brother's name from the deed and transfer it in her name. Then she will have to sign a quitclaim deed in your mother's name and transfer the property to her.
Your brother's wife will have to file an affidavit of heirship and remove your deceased brother's name from the deed and transfer it in her name. Then she will have to sign a quitclaim deed in your mother's name and transfer the property to her.