The Magical Mystical Lady Bird Deed
Estate Recovery and loosening of the estate tax laws has created some upheaval in the form of real estate ownership. This combined with other factors makes choosing how to properly title your real property even more of a significant factor in both long-term care and estate planning. Many people think that joint real estate ownership will solve those problems, but they may actually cause more problems. With all the changes in the law, there is not a single strategy that works for all clients, however, so it is best to consult with an experienced attorney to see which is best in your situation.
One form of ownership that suits the planning needs of most of our clients is an enhanced life estate deed, also known as a “Lady Bird” deed. As its nickname implies, this type of deed was allegedly used by President Lyndon Johnson once to convey some real estate to his wife, Claudia Alta “Lady Bird” Johnson. While I have no personal knowledge of whether this is true or not, it gives the document a catchy name that clients remember, so I use it.
The Lady Bird deed works similarly to a typical life estate deed, where the owner of the property retains the right to use the property for the rest of his or her or their lives. However, where the Lady Bird deed differs is that the owner also retains the right to convey or mortgage the property. What this means for the owner is that he or she or they can do anything with the property, even change who the beneficiaries are. If the property is not transferred to someone else before the life estate is extinguished (i.e., the owner dies), then the property would pass to the named beneficiary or beneficiaries, known as “remaindermen.” At death, the deed basically functions like a transfer on death bank account or other assets that have named beneficiaries that can be changed during your lifetime.
Lady Bird Deed Benefits
The benefits of using a Lady Bird deed include the following:
- Creditor Protection for “Entireties” property owned by husband and wife;
- Eligibility for governmental benefits not affected;
- Not subject to claims from “remaindermen” or their creditors;
- No gift tax return required;
- Income taxes may be lower when the property is sold;
- Property taxes are not affected; and
- May help keep family harmony versus joint ownership.
Lady Bird Deed Risks
With all the benefits of a Lady Bird deed, why doesn’t everyone have one? Most people do not know about them and many practitioners still do not use them in their practices. Some others use them all the time, which can also cost thousands if one spouse enters a nursing home while the other stays home or if the beneficiaries have issues that cloud the title to the property. The language of the deed is more complicated than a typical warranty deed or quit claim deed and these deeds are not right for every situation, so it is important to work with an attorney familiar with Lady Bird deeds to ensure it is done properly.
Free Consultation for Lady Bird Deed and Estate Planning
If you would like more information about whether a Lady Bird Deed should be used in your estate plan or long-term care plan, please call us or email us today to schedule an appointment for a free initial consultation with Attorney Shawn Eyestone. You can even schedule online.