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 michiganbankermel,
A ladybird deed can be done when there is a mortgage on the property however, the new owner of the property will have to refinance the mortgage immediately.
A ladybird deed can be done when there is a mortgage on the property however, the new owner of the property will have to refinance the mortgage immediately.
Can we fill this ourselves without a lawyer. Who do you fill it with
Hi bastianellielin,
You can fill out the deed yourself but it is always better to take the help of an attorney in order to fill out the deed.
Thanks
You can fill out the deed yourself but it is always better to take the help of an attorney in order to fill out the deed.
Thanks
i am the grantee on my mothers lady bird deed my brothers sued me in her name and for her best intrest. its allready in her best intrest. law suit has gone on 4 years and is stii going on i have paid 30,000 dollars and until she dies i have no intrest in the land
Hi janie,
If you're the grantee of the deed, that means you own the property. No one can take the property from you.
Thanks
If you're the grantee of the deed, that means you own the property. No one can take the property from you.
Thanks
My aunt is in Florida. I'm in Pa. She is now in a nursing home. She still owes $42k on her home. I cannot afford payments on two homes. What can I do? Can I apply for some kind of hardship from the mortgage company? Can I sell my aunt's home? My aunt has a will with me as the sole beneficiary. Please help? My aunt also has no savings, no money at all. I have been told to do a lady bird deed. But this would still require me to carry two mortgages and I can't afford that.
THank you.
THank you.
Hi corona,
If you're not the owner of your aunt's property or if your name is not mentioned on the mortgage docs, then you're not responsible for the mortgage payments. You can sell off your aunt's property if she agrees to it. As far as ladybird deed is concerned, you should contact an attorney and take his opinion in this matter.
Thanks
If you're not the owner of your aunt's property or if your name is not mentioned on the mortgage docs, then you're not responsible for the mortgage payments. You can sell off your aunt's property if she agrees to it. As far as ladybird deed is concerned, you should contact an attorney and take his opinion in this matter.
Thanks
Does Michigan accept this type of deed?
is a lady bird deed legal in the state of West Virginia?
Is it a good idea to leave a house to a grandchild in case of divorce of my daughter and her husband?
if i transfer land to my children with a lady bird deed, can i build a home on this property at a later date, or does the home have to be in my childrens name?
Hi!
Welcome to forums!
To Karen,
As far as I know, ladybird deed is not accepted in Michigan.
To Alaska,
I don't think ladybird deed is legal in West Virginia.
To Dunalee,
If the grandchild is an adult, then the property can be left to him or her. If the grandchild is not an adult, then the property can be left in a living trust.
To Guest,
Unless your children give you the permission, you won't be able to build a house on that property. Moreover, there are chances that the property should be in the name of the children.
Sussane
Welcome to forums!
To Karen,
As far as I know, ladybird deed is not accepted in Michigan.
To Alaska,
I don't think ladybird deed is legal in West Virginia.
To Dunalee,
If the grandchild is an adult, then the property can be left to him or her. If the grandchild is not an adult, then the property can be left in a living trust.
To Guest,
Unless your children give you the permission, you won't be able to build a house on that property. Moreover, there are chances that the property should be in the name of the children.
Sussane
...and she wants to sell the house to move closer to one of her children. She is worried about it. What, if anything can I tell her to do, State of Texas, Papa has alzheimers, and in wheel chair, also on Medicade, Can you help?
Welcome djbj,
As far as I know, if your mother is the sole owner of the property, then she can sell off the property and move closer to one of her children. Nevertheless, it will be a good idea to contact a real estate attorney and take his opinion in this matter.
As far as I know, if your mother is the sole owner of the property, then she can sell off the property and move closer to one of her children. Nevertheless, it will be a good idea to contact a real estate attorney and take his opinion in this matter.
My mother deeded her house to a granddaughter. I know she has to pay the taxes but the tax bill is in the granddaughter's name. Who is allowed to claim the taxes on their income taxes?