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 cjs,
If the tax bill is in granddaughter's name, then the granddaughter will be able to claim the taxes on her income tax.
Take care
If the tax bill is in granddaughter's name, then the granddaughter will be able to claim the taxes on her income tax.
Take care
my ex-husband is on his deathbed--he has a mortgage of 60k on his home. the market is down in janesville, wi gm moved out on us and there are many properties for sale. our son with his new baby plan on moving into the home. he is only 24 and doesnt have credit for a refinance. the goal is for title to pass to him and he assume the mortgage. will the lady bird deed do this?
A ladybird will only help you in transferring the property to your son. It won't transfer the mortgage in your name. Thus, though you transfer the property, you will remain liable for the mortgage payments.
Are you available to prepare the above document within the next ten days and if so what woulld be the cost.
[Email address deleted as per forum rules. Thanks.]
[Email address deleted as per forum rules. Thanks.]
Hi Parrott,
You need to contact a real estate attorney and he will help you in drafting the deed.
Thanks
You need to contact a real estate attorney and he will help you in drafting the deed.
Thanks
HELLO- my mother has been receiving Texas QMB since 1999. She is now also on the C.A.S program a long term care program since 2008. Since she started QMB in 99 would she be exempt from MERPS or does the 2008 CAS program apply since she started in 08. Also if I have POA for my mom but not my father can a ladybird deed still be done. Also could her house be sold prior to her death without losing any of her long term care benefits, she is also on the CBA waitlist. Thank you for any advice - this has been very confusing experience - feel free to talk to me like Im 5yr old I think I would understand it all better.
Hi letty,
If your mother's house is sold off before her death, she will lose the long term care benefits. If you have POA on your mother's behalf, then you will be able to transfer your mother's share of the property in your name but your father will have to transfer his share of the property in your name.
Take care
If your mother's house is sold off before her death, she will lose the long term care benefits. If you have POA on your mother's behalf, then you will be able to transfer your mother's share of the property in your name but your father will have to transfer his share of the property in your name.
Take care
So the fact that she has been on QMB prior to the 2005 does not exempt them? Also With the Deed in place will my father be penalized if he eventually needs Long term care, I heard that may happen and he would not qualify. Once again thank for any advice.
It will be better if you could contact an attorney and take his help in this matter.
Can you explain the look back period that Medicaid does. I heard its 5yrs. If we do a ladybird now- do we wait 5yrs before applying for long term care. Can you give an example.
Hi Letty,
As far as I know, ladybird deed, does not affect the eligibility of Medicaid. To know more on this, take a look at the given page:
http://www.mortgagefit.com/texas/ladybirddeed-medicaid.html
As far as I know, ladybird deed, does not affect the eligibility of Medicaid. To know more on this, take a look at the given page:
http://www.mortgagefit.com/texas/ladybirddeed-medicaid.html
Is this deed legal in the state of Oregon?
Hi mamoo,
As far as I know, this deed is not legal in Oregon. Nevertheless, you can contact a real estate attorney and take his opinion in this matter.
Take care.
As far as I know, this deed is not legal in Oregon. Nevertheless, you can contact a real estate attorney and take his opinion in this matter.
Take care.
How does a Ladybird deed effect a will! Like If some is named in a will but not named in a Ladybird deed ? How does that work ? and is a legal document in Michigan?
My dad died in January. My mom would like to do an Enhanced life estate deed to put my name. The house has homestead protection. When she pass away, did the house will continue has the protection?