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
can you use a lady bird deed to transfer property ownership to 3 children for purposes of transferring ownership to qualify for aid & attendance? the property is timberland and the spouse owns 1/3 interest in the land. the property cannot be sold because one of the owners has willed her portion to her church upon her death and the other owner has dementia. the 1/3 value of the property is the only asset which disqualifies the veteran from benefits. the family does not want to do irrevocable trust and were told to do lbd rather than quit claim deed.
Hi Guest!
Welcome to forums!
A ladybird deed can be used to transfer property ownership to 3 children. However, it will be always better to contact a real estate attorney and check out your state laws in this regard.
Feel free to ask if you've further queries.
Sussane
Welcome to forums!
A ladybird deed can be used to transfer property ownership to 3 children. However, it will be always better to contact a real estate attorney and check out your state laws in this regard.
Feel free to ask if you've further queries.
Sussane
Can you tell me if the Lady bird deeds are accepted in the State of Michigan?
Thanks.
Thanks.
Hi Nancy!
Welcome to forums!
As far as I know, ladybird deed is not valid in the state of Michigan. Nevertheless, you should have a word with the real estate attorney and take his opinion in this matter.
Feel free to ask if you've further queries.
Sussane
Welcome to forums!
As far as I know, ladybird deed is not valid in the state of Michigan. Nevertheless, you should have a word with the real estate attorney and take his opinion in this matter.
Feel free to ask if you've further queries.
Sussane
Can one write their own Lady bird deed and simply have it recorded after signing and having it witnessed??
(as usual, I'm perplexed. After inserting my username, I read it's already been taken! How could that be??)
(as usual, I'm perplexed. After inserting my username, I read it's already been taken! How could that be??)
Will a Lady Bird Deed duplicate a revocable trust?
Hi cvenetianer,
It is true that one can write his/her own ladybird deed. However, it is always advised to take help of an attorney in order to get the ladybird deed drafted. As far as your second query is concerned, you should have a word with your real estate attorney.
It is true that one can write his/her own ladybird deed. However, it is always advised to take help of an attorney in order to get the ladybird deed drafted. As far as your second query is concerned, you should have a word with your real estate attorney.
what if we sell one year after grantor death, for more than the stepped up rate? do we owe cap gains?
Hi damon!
Welcome to forums!
If you receive a profit from the sale of the property, then you will be liable for paying the capital gains taxes. You can contact a CPA and he will assist you in knowing it in a better way.
Feel free to ask if you've further queries.
Sussane
Welcome to forums!
If you receive a profit from the sale of the property, then you will be liable for paying the capital gains taxes. You can contact a CPA and he will assist you in knowing it in a better way.
Feel free to ask if you've further queries.
Sussane
Can I rent house out to get money to pay taxes and insurance I live in Texas and house is in lady bird trust and my sister and I are the ones who get house after mother passes away she is in rest home now
I own 2 houses. Can I have a life estate on both
My brother and I have become co-owners on a home in MI with a lady bird deed. Can either of us sell the house without the permission on the other?
This topic has become too long so I have locked it. Please ask your questions by posting a new topic in this forum.
