Lady Bird Deed

Who gets the house without the cost and inconvenience of Probate?

A Florida lady bird deed allows the owner(s) to transfer property upon death while avoiding probate. The deed is inexpensive, revocable, and simple compared to a trust.

ADVANTAGES DISADVANTAGES

ADVANTAGES

Avoids probate

A lady bird deed allows a property to transfer on death to named beneficiaries without probate.

Inexpensive

A lady bird deed can be obtained for a relatively low cost compared to a more complicated and expensive living trust. The grantor will avoid documentary stamp taxes if the grantor is the holder of the enhanced life estate.

Simple to set up

A lady bird deed does one thing but does it well: it transfers a person’s real property upon the death of the property owner.

Can be revoked

The property owner is free to change their mind at any point during their lifetime. The property owner can enter into a new deed that gives the remainder interest to someone else or cancels the lady bird deed entirely.

Protects against Medicaid

A lady bird deed can be a useful tool in Florida for people who qualify for Medicaid and who are concerned that the government will be able to take non-homestead properties after their death. A ladybird deed transfers property after death outside probate, so the property is not part of the decedent’s probate estate. In this way, non-homestead properties are kept out of the probate estate and are protected from collection by medical claims or any other creditors after the property owner’s death.

Doesn’t trigger a gift tax

Transferring property with a lady bird deed does not trigger a gift tax. The transfer is not a completed gift during the lifetime of the property owner.

In addition, a lady bird deed lets your heirs take advantage of a step-up in basis. A stepped-up basis means that if the property is eventually sold by the beneficiary, the beneficiary will pay income tax only on the appreciation in value from the date when the original property owner died.

DISADVANTAGES

Lack of Asset Protection.

A creditor of the current owner may place a lien on the property, other than a homestead, conveyed by a lady bird deed.

Constitutional Restrictions.

A person cannot use a lady bird deed to disinherit a spouse or minor child.

Unexpected Deaths.

If the holder of the remainder interest dies before the life tenant dies, it may become unclear as to what happens to the property when the original life tenant later dies.

Changes to the Estate Plan.

It will require extra work for the original owner to change their plan should they later decide not to leave the property to the named remainderman.