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 troubled,
If the property has already been transferred through a quitclaim deed, then there is no need for a lady bird deed. However, the grantor will not have any rights to the property if he quitclaims it to the grantee. On the contrary, through a lady bird deed the grantor can transfer the property while retaining his/her rights to it.
If the property has already been transferred through a quitclaim deed, then there is no need for a lady bird deed. However, the grantor will not have any rights to the property if he quitclaims it to the grantee. On the contrary, through a lady bird deed the grantor can transfer the property while retaining his/her rights to it.
My brother states he has a life estate on my parents property and showed us a copy of the deed but in the life estate clause it states Mother owns it until her death. My Dad died in '99 so this made my Mother sole owner and she has made a new will and has given my other brother a deed and a life estate for said property. Will the brother my Mom gave the property be the one to legally have the homestead?
Hi Carouselady,
Has your mother signed any deed to your other brother? Has it been notarized and recorded? If yes, then I think your other brother now owns the house. A lady bird deed gives the grantor not only the right to stay on the property till death, but also gives him/her the right to sell or make changes to the property without notifying the beneficiaries. Thus, I think, your mother does have the right to make changes to the title and give it to your other brother. However, you should discuss this with a real estate attorney, if you have any doubts.
Has your mother signed any deed to your other brother? Has it been notarized and recorded? If yes, then I think your other brother now owns the house. A lady bird deed gives the grantor not only the right to stay on the property till death, but also gives him/her the right to sell or make changes to the property without notifying the beneficiaries. Thus, I think, your mother does have the right to make changes to the title and give it to your other brother. However, you should discuss this with a real estate attorney, if you have any doubts.
My mother may be heading towards a nursing home in MI and applying for medicaid. Spouse has passed. I have a quit claim to her home and named trustee. Her lawyer is telling me to have a lady bird deed done and naming me again as trustee. This way she will be eligible for medicaid. Is this the correct thing to do and will it contine to keep property out of probate as before?
Hi JJ,
I think your lawyer has said the right thing. A lady bird deed will help you in keeping the property out of probate. You should remember that medicaid has a look back period of 5 years. Any transfer of property within these 5 years will make your mother ineligible for medicaid.
However, it is not the same case with ladybird deed. It will not make your mother ineligible for Medicaid as long as she expresses her intent to return from the nursing home. Even if she does not return, the property will be considered exempt asset for Medicaid if her spouse or relative occupies it.
Take Care.
I think your lawyer has said the right thing. A lady bird deed will help you in keeping the property out of probate. You should remember that medicaid has a look back period of 5 years. Any transfer of property within these 5 years will make your mother ineligible for medicaid.
However, it is not the same case with ladybird deed. It will not make your mother ineligible for Medicaid as long as she expresses her intent to return from the nursing home. Even if she does not return, the property will be considered exempt asset for Medicaid if her spouse or relative occupies it.
Take Care.
Are quitclaim deeds still legal? Are they valid in Alabama?
Please help! My aunt who resides in Ohio is terminally ill and about to be placed in a Nursing home. She rents an apartment in Ohio. She also owns a home in Tennesse that is willed to me. She has no life insurance, and no money to speak of. I need to know if I can save the home from being taken by the nursing home, what do I do. Should I sell it? Please help...
Welcome,
To Melaine,
Yes, quitclaim deeds are still considered as legal documents for transferring property. As far as I know, they are legal in Alabama.
To Sherry,
Though the property is willed to you, presently, you are not the owner of the property. So the medicaid will have the right to recover it. You can ask your aunt to file a lady bird deed and transfer the property to you. This may help you in saving the property. To know more about it, check out the following link:
http://www.mortgagefit.com/texas/ladybirddeed-medicaid.html
However, before transferring the property in your name with a ladybird deed, consult an attorney. He will be the best person to guide you in this regard.
To Melaine,
Yes, quitclaim deeds are still considered as legal documents for transferring property. As far as I know, they are legal in Alabama.
To Sherry,
Though the property is willed to you, presently, you are not the owner of the property. So the medicaid will have the right to recover it. You can ask your aunt to file a lady bird deed and transfer the property to you. This may help you in saving the property. To know more about it, check out the following link:
http://www.mortgagefit.com/texas/ladybirddeed-medicaid.html
However, before transferring the property in your name with a ladybird deed, consult an attorney. He will be the best person to guide you in this regard.
in a family trust, my father has passed away and my brother is the trustee. he needs to transfer title of the family home from my father's name into our three names as the heirs. does he use a quit claim deed or a ladybird deed?
thank you for your help.
thank you for your help.
Hi Brent,
In the absence of your father, your brother is responsible for the estate as he is the trustee of the trust. In order to transfer the title to all three of you, your brother needs to sign a quitclaim deed where the three of you would be the grantees. A lady bird deed is not required in this case. It is used when a grantor transfers ownership in the property to someone else and at the same time wants to retain a right to stay in the property until death.
Thanks,
Jerry
In the absence of your father, your brother is responsible for the estate as he is the trustee of the trust. In order to transfer the title to all three of you, your brother needs to sign a quitclaim deed where the three of you would be the grantees. A lady bird deed is not required in this case. It is used when a grantor transfers ownership in the property to someone else and at the same time wants to retain a right to stay in the property until death.
Thanks,
Jerry
when my grandfather passed away we discovered that his daughter, who had always paid his bills had him sign several deeds that she drew up herself giving her everything. He still has a daughter, that is mentally ill, living on the prop.. Are these deeds legal? There are several mistakes in them. The property really never had a clear deed on it. My grandparents paid cash for it and built the house with cash.
My father transferred ownership of a property to me before he died. He had taken out a line of credit on this property. I don't think that with the economy the way it is and my credit history I can qualify for a loan to pay off the loan. Will the bank care who the house belongs to as long as the loan is being paid every month? And for taxes can I claim the payments of the loan that is not in my name?
Currently we have a 2nd home that we have put our children's names on for estate purposes as well as this has allowed our son to file homestead on it. If we change to a Ladybird deed can he still claim homestead?
to gina,
it's difficult to say whether the deeds are legal. were they notarized? i think if possible, you should get the deeds reviewed by an attorney as he would be the right person to determine if the deeds are legally valid.
to isabela,
as long as you make the loan payments every month, the lender would not mind who the house belongs to. all that matters to them is the timely payments towards the loan. as for the taxes, i don't think you can claim the payments of the loan. in order to do so, you need to refinance in your name.
to unknown,
if you use a lady bird deed, your son would still be able to claim homestead. deeds do not generally affect the eligibility of a property for homestead. however, your son needs to be on the title, if he wants to claim the homestead. if the property is transferred to someone else through a lady bird deed, it could affect the homestead status of the property.
it's difficult to say whether the deeds are legal. were they notarized? i think if possible, you should get the deeds reviewed by an attorney as he would be the right person to determine if the deeds are legally valid.
to isabela,
as long as you make the loan payments every month, the lender would not mind who the house belongs to. all that matters to them is the timely payments towards the loan. as for the taxes, i don't think you can claim the payments of the loan. in order to do so, you need to refinance in your name.
to unknown,
if you use a lady bird deed, your son would still be able to claim homestead. deeds do not generally affect the eligibility of a property for homestead. however, your son needs to be on the title, if he wants to claim the homestead. if the property is transferred to someone else through a lady bird deed, it could affect the homestead status of the property.
Does New York State acknowledge a Lady Bird Deed ? If yes, please advise on the question below...
Since we own a home in bott Florida and New York, could one (1) Lady Bird Deed be drawn up for both homes.
Thanks for your advice
Since we own a home in bott Florida and New York, could one (1) Lady Bird Deed be drawn up for both homes.
Thanks for your advice