Estate Planning - Lady Bird Deed (Enhanced Life Estate Deed)

What is a Lady Bird Deed?

A Lady Bird Deed, also called an Enhanced Life Estate Deed, is a special type of deed that allows you to transfer property to beneficiaries upon your death while retaining complete control during your lifetime. It's named after Lady Bird Johnson, though the deed was never actually used by her.

How It Works

During Your Lifetime

You retain all rights to the property:

• Full Ownership: Complete control over the property
• Right to Sell: Can sell without beneficiary permission
• Right to Mortgage: Can refinance or take out loans
• Right to Revoke: Can change or cancel the deed anytime
• Income Rights: Keep all rental income
• Tax Benefits: Maintain homestead exemptions

Upon Your Death

Automatic transfer occurs:

• No Probate: Property transfers immediately
• No Court Process: Avoids probate costs and delays
• Step-Up in Basis: Beneficiaries get favorable tax treatment
• Creditor Protection: May protect from your creditors
• No Delay: Beneficiaries receive property immediately

Key Advantages

Avoid Probate

• No Court Involvement: Property doesn't go through probate
• Save Money: Eliminate probate costs and attorney fees
• Save Time: Transfer is immediate, not months or years
• Maintain Privacy: No public probate records
• Reduce Hassle: Simplify the transfer process

Maintain Complete Control

Unlike regular life estate deeds:

• Sell Without Permission: No beneficiary consent needed
• Change Beneficiaries: Revoke or amend anytime
• Refinance Freely: No restrictions on mortgages
• Rent or Lease: Full landlord rights
• Gift or Transfer: Complete flexibility

Protect Medicaid Eligibility

Critical for long-term care planning:

• Not a Countable Asset: Doesn't affect Medicaid eligibility
• No Look-Back Period: Not subject to 5-year lookback
• Preserve Benefits: Maintain qualification for benefits
• Asset Protection: Protect home from Medicaid recovery

Tax Benefits

For You:

• Keep homestead exemption
• Maintain property tax benefits
• Deduct mortgage interest
• Claim capital improvements

For Beneficiaries:

• Step-up in tax basis at death
• Minimize capital gains tax
• Avoid gift tax issues
• Favorable tax treatment

Lady Bird Deed vs. Other Options

vs. Traditional Life Estate Deed

Lady Bird Deed Advantages:

• Sell without beneficiary consent
• Revoke or change anytime
• No gift tax implications
• Maintain complete control

Traditional Life Estate:

• Beneficiary consent required to sell
• Irrevocable transfer
• May trigger gift taxes
• Limited control

vs. Living Trust

Lady Bird Deed Advantages:

• Lower upfront cost
• Simpler to create
• No trust administration
• Immediate effectiveness

Living Trust Advantages:

• Covers all assets, not just real estate
• More flexibility for complex estates
• Better for incapacity planning
• Multiple properties easier to manage

vs. Joint Ownership with Right of Survivorship

Lady Bird Deed Advantages:

• Full control without co-owner
• No exposure to co-owner's creditors
• Better tax treatment for beneficiaries
• Easier to change beneficiaries

Joint Ownership:

• Immediate co-owner rights
• Simpler to understand
• Banks more familiar with it

vs. Transfer on Death Deed (TOD)

Lady Bird Deed Advantages:

• Available in more states
• Better creditor protection
• Stronger Medicaid planning tool
• More established case law

TOD Deed (where available):

• Simpler legal concept
• Newer option in some states
• Similar probate avoidance

When to Use a Lady Bird Deed

Consider a Lady Bird Deed if you:

Want to Avoid Probate

• Own real estate
• Want immediate transfer at death
• Desire privacy
• Want to save costs

Need Medicaid Planning

• Anticipate long-term care needs
• Want to protect your home
• Need to preserve Medicaid eligibility
• Don't want to trigger lookback period

Value Control and Flexibility

• May need to sell property
• Want option to change beneficiaries
• Might need to refinance
• Want to maintain all rights

Have Simple Estate Plans

• Primary asset is your home
• Clear beneficiary designation
• No complex family dynamics
• Want cost-effective solution

States That Recognize Lady Bird Deeds

Lady Bird Deeds are specifically authorized in:

• Florida
• Michigan
• Texas
• Vermont
• West Virginia

Some other states may allow similar deeds through different legal mechanisms. Consult with us about your state's options.

Creating a Lady Bird Deed

Our Process

Step 1: Consultation

• Review your property and goals
• Discuss beneficiaries
• Explain implications
• Answer all questions
• Assess Medicaid considerations

Step 2: Document Preparation

• Draft Lady Bird Deed
• Ensure proper legal language
• Include all necessary provisions
• Prepare recording documents

Step 3: Execution

• Properly sign deed
• Notarize document
• Witness as required
• Ensure legal compliance

Step 4: Recording

• File with county recorder
• Obtain recorded copy
• Provide certified copies
• Update property records

What's Needed

• Property deed or legal description
• Beneficiary information
• Property tax information
• Mortgage information (if applicable)
• Identification documents

Important Considerations

Mortgage Issues

• Inform mortgage company (though not required)
• May trigger due-on-sale clause (rare)
• Shouldn't affect refinancing rights
• Keeps you as property owner

Multiple Beneficiaries

• Can name multiple remaindermen
• Specify percentages or equal shares
• Consider potential conflicts
• May complicate future sale by heirs

Creditor Claims

Your Creditors:

• Lady Bird Deed may protect from your creditors
• After death, harder for creditors to reach property
• Some protection from Medicaid recovery

Beneficiary Creditors:

• No exposure during your lifetime
• Beneficiaries have no current interest
• Protection until your death

Capital Gains Tax

Beneficiaries receive property with:

• Step-up in tax basis to date-of-death value
• Minimal or no capital gains tax when they sell
• Significant tax savings vs. lifetime gift

Homestead Exemptions

• You maintain all homestead protections
• Keep property tax breaks
• Preserve exemptions
• No disruption to benefits

After You Create a Lady Bird Deed

Your Rights and Responsibilities

You continue to:

• Pay property taxes
• Maintain insurance
• Keep up the property
• Make all decisions
• Enjoy all benefits
• Handle all obligations

If You Want to Make Changes

You can:

• Revoke the deed entirely
• Change beneficiaries
• Add or remove beneficiaries
• Sell the property
• Gift the property
• Leave it in your will instead

If You Want to Sell

• You have complete authority
• No beneficiary permission needed
• Proceed as if deed doesn't exist
• Buyer gets clear title
• Lady Bird Deed is automatically revoked

When Your Beneficiaries Inherit

Immediate Transfer

Upon your death, beneficiaries:

• Take title automatically
• Avoid probate process
• Receive step-up in basis
• Can sell immediately (if desired)
• Must record death certificate

Their Responsibilities

Beneficiaries should:

• Record your death certificate
• Update property records
• Transfer utilities
• Update insurance
• Pay ongoing expenses
• File any required tax returns

Selling the Property

If beneficiaries want to sell:

• Can sell immediately
• Each must sign sales documents
• Share proceeds per deed terms
• Pay minimal capital gains (step-up benefit)

Potential Drawbacks

Not Available Everywhere

• Only recognized in certain states
• Alternative options needed elsewhere
• Legal uncertainty in some jurisdictions

May Affect Refinancing

• Some lenders unfamiliar with Lady Bird Deeds
• May request removal before refinancing
• Could complicate mortgage process
• Usually can be resolved

Multiple Beneficiaries Can Complicate

• All must agree to sell after your death
• Potential for family disputes
• Unequal shares may cause issues
• Consider family dynamics

Not a Complete Estate Plan

Lady Bird Deed only covers:

• One piece of real property per deed
• Doesn't address other assets
• Doesn't cover incapacity planning
• Should be part of comprehensive plan

Lady Bird Deed and Medicaid

Why It's Powerful for Medicaid Planning

Asset Protection:

• Home not counted for Medicaid eligibility
• Avoids 5-year lookback period
• No penalty period triggered
• Protects home from Medicaid recovery

Medicaid Recovery:

• Estate recovery can't reach property
• Property passed before death
• Not part of probate estate
• Beneficiaries protected

Important Notes:

• Still your home while living
• Can live there without issues
• Maintains homestead exemption
• Consult Medicaid planner for complex situations

Integration with Estate Plan

A Lady Bird Deed works well with:

Living Will

• Healthcare decisions covered
• End-of-life wishes documented
• Medical treatment preferences

Financial Power of Attorney

• Agent can act if you're incapacitated
• Bill paying and financial management
• Doesn't affect Lady Bird Deed validity

Healthcare Power of Attorney

• Medical decision-making
• HIPAA authorization
• Healthcare proxy designation

Last Will and Testament

• Covers all other assets
• Names executor
• Guardian for minor children
• Backup plan for property

Cost and Timeline

Typical Costs

• Attorney fees: Varies by location and complexity
• Recording fees: County-dependent
• Title search (optional but recommended)
• Notary fees: Minimal

Timeline

• Consultation: 1 hour
• Document preparation: 1 week
• Signing and notarization: 1 day
• Recording: 1-2 weeks
• Total: Usually 2-3 weeks

Common Questions

Q: Can I create a Lady Bird Deed myself? A: While technically possible, professional preparation is highly recommended to ensure legal validity and proper execution.

Q: Will I owe gift tax? A: No. Lady Bird Deeds don't trigger gift tax because the transfer occurs at death, not during life.

Q: Can my beneficiaries sell the property after I die? A: Yes, immediately and without probate. All beneficiaries must agree if multiple are named.

Q: What if my beneficiary dies before me? A: Include contingent beneficiaries in the deed, or the property may go through probate.

Q: Can I have a Lady Bird Deed and a mortgage? A: Yes. The mortgage stays with the property. Beneficiaries inherit subject to the mortgage.

Q: Does it affect my homeowner's insurance? A: No. You remain the owner and maintain the same insurance coverage.

Get Started with a Lady Bird Deed

Protect your home and simplify the transfer process for your beneficiaries. A Lady Bird Deed may be the perfect solution for your estate planning needs.

Schedule Your Consultation

Contact us today to:

• Determine if a Lady Bird Deed is right for you
• Review your property and goals
• Discuss Medicaid planning implications
• Understand costs and timeline
• Begin the process

Our experienced estate planning attorneys will ensure your Lady Bird Deed is properly prepared, executed, and recorded, giving you peace of mind and your beneficiaries a smooth transfer process.