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
what kind of attorney do I need to draw up this kind o deed, real estate or elder law attorney
Hi laurenk,
You will have to contact a real estate attorney in order to get the ladybird deed drafted.
Thanks
You will have to contact a real estate attorney in order to get the ladybird deed drafted.
Thanks
I don't want to become homeless when my father passes away, and my dad wants me to have the house. Would this type of deed assist me. My siblings have agreed at this time that I could have first choice of buying the homeplace.
Hi Guest!
Welcome to forums!
If there is no mortgage on the property, then your father can sign a warranty deed and transfer the property to you. If there is a mortgage on the property, then your father should sign a quit claim deed. After the property transfer is complete, you will have to refinance the mortgage in your name.
Feel free to ask if you've further queries.
Sussane
Welcome to forums!
If there is no mortgage on the property, then your father can sign a warranty deed and transfer the property to you. If there is a mortgage on the property, then your father should sign a quit claim deed. After the property transfer is complete, you will have to refinance the mortgage in your name.
Feel free to ask if you've further queries.
Sussane
Can my aunt and uncle create a ladybird deed for their vacation home and list me as a beneficiary, or does it only work for their primary property? What are the tax consequences?
Hi pauline,
Your uncle and aunt can use a quit claim deed in order to transfer the property to you. However, as far as I know, your uncle and aunt will be able to use a ladybird deed in order to transfer the vacation home to you. After the property is transferred, you would be liable for taxes. You will have to pay the stamp doc fees, deed recording fees, etc.
Thanks
Your uncle and aunt can use a quit claim deed in order to transfer the property to you. However, as far as I know, your uncle and aunt will be able to use a ladybird deed in order to transfer the vacation home to you. After the property is transferred, you would be liable for taxes. You will have to pay the stamp doc fees, deed recording fees, etc.
Thanks
My mother had 2 ladybird deeds drawn up...one for herself and one for my dad to sign as she knew my dad would outlive her. She has passed away, and while her will leaves everything to my dad, the LBDs have it as belonging to the children with survivorship rights for herself and my dad. The home was definitely community property. Do the children now also have rights to the home now, or only my dad?
My father passed away in 1999 without his will being probated leaving his property of 25 acres to my mother. My mother passed away in 2009 and Medicaid took care of her in a nursing home and paid for her medical care and hospital bills. Can medicaid recovery pursue that 25 acres that actually was owned by my father. THat 25 acres is still in my father's mane. Please help.
Hi Tx Sib,
The ladybird deed will come into effect as soon as it is signed whereas the will comes into effect after the death of the grantor. Thus the ladybird deed will be given importance in this case and you and your siblings will own the property.
Hi crockett,
If the property is still in your father's name, then Medicaid will not be able to do a estate recovery.
The ladybird deed will come into effect as soon as it is signed whereas the will comes into effect after the death of the grantor. Thus the ladybird deed will be given importance in this case and you and your siblings will own the property.
Hi crockett,
If the property is still in your father's name, then Medicaid will not be able to do a estate recovery.
OK, actually, I found out that my mom made one for herself, thinking it would cover all the house...trying to protect it because my Dad's health is getting worse as well. Mom is dead. He does not have one in effect for his portion. I have a sibling who has moved in and is being abusive to my dad. I'm trying to figure out if and how I can protect my dad without dad having to leave his home. Is my sibling entitled to live there?
did not see NY as a state where it would be acceptable...if not what would be something similar?
T Y
T Y
To Tx Sib,
If your father's name is mentioned on the property deed, then he will be able to stay in the property. If your brother's name is mentioned in the property deed, then he is entitled to live in the property. If you are one of the owners of the property and want to safeguard your father's interest, then you can add him to the property deed.
Hi Henri,
As a ladybird deed is not accepted in New York, you need to contact a real estate attorney and he'll let you know what type of form you may use.
If your father's name is mentioned on the property deed, then he will be able to stay in the property. If your brother's name is mentioned in the property deed, then he is entitled to live in the property. If you are one of the owners of the property and want to safeguard your father's interest, then you can add him to the property deed.
Hi Henri,
As a ladybird deed is not accepted in New York, you need to contact a real estate attorney and he'll let you know what type of form you may use.
My grandmother has a ladybird general warranty deed listing me as the gaurantee. It is on file in the texas county we live in and I am also listed on the appraisal statement and taxes along with her. Am I able to apply for a home improvement loan if needed. She currently lives in a nursing home and I live in the home. The home is almost 100 years old and in need of repairs.
Hi Eileen,
If your name is mentioned on the property deed, then you would be considered as the owner of the property. Thus, you would be able to take out a home improvement loan in your name depending upon the equity that you have in the property.
Thanks
If your name is mentioned on the property deed, then you would be considered as the owner of the property. Thus, you would be able to take out a home improvement loan in your name depending upon the equity that you have in the property.
Thanks
Jessica is the Lady bird deed applicable in New York and is it applicable if there is no mortgage? thank you