A ladybird deed, also known as an enhanced life estate deed, is an estate planning tool that can help you avoid probate in Florida. This type of deed allows you to transfer your property to a beneficiary without having to go through the probate process upon your death. In this comprehensive guide, we will explain what a ladybird deed is, how it works in Florida, the benefits and disadvantages, and the steps for creating one.
What is a Lady Bird Deed?
A ladybird deed, also called an enhanced life estate deed, is a special type of deed that allows you to transfer ownership of your property immediately to a beneficiary while you maintain control of the property during your lifetime.
With a ladybird deed, you name yourself as the current life estate holder and someone else – usually your child, spouse, or other beneficiary – as the remainderman. This means you keep full use and ownership of the property while you are alive. When you pass away, the beneficiary you named in the deed automatically becomes the sole legal owner of the property.
The name “lady bird deed” comes from the former First Lady Claudia Alta “Lady Bird” Johnson. Lady Bird Johnson reportedly used this type of deed to pass along ownership of her Texas ranch to her daughters. While ladybird deeds are sometimes called ladybird deeds with no space, they are legally known as enhanced life estate deeds.
How Does a Lady Bird Deed Work in Florida?
A Florida ladybird deed splits the interest in a property into two parts:
- An enhanced life estate for the current owner
- A remainder interest for beneficiaries
The original owner, as a life tenant, retains full control and benefits of the property during their lifetime. This lifetime control is “enhanced” compared to a standard life estate deed.
Upon the death of the life tenant, ownership automatically transfers to the named remainder beneficiaries without probate under Florida law.
To create a ladybird deed, it must include:
- Name of the owner (grantor)
- Legal description of the property
- Names of remainder beneficiaries
- Enhanced life estate provision
- Homestead protection paragraph (for primary residence)
The deed is then recorded with the county. The owner can sell, mortgage, or otherwise deal with the property freely during life. When they pass away, beneficiaries file a death certificate to claim ownership.
What are the benefits of a ladybird deed in Florida?
There are several advantages to using a ladybird deed in an estate plan:
- Avoids Probate: Since property transfers by operation of law at death, it is not part of the probate estate. This saves time and legal costs.
- Retains Control and Use: The owner maintains all powers of ownership during their lifetime.
- Revocable: The owner can change beneficiaries or revoke the deed.
- No Gift Tax: Transfer is not a completed gift until after death.
- Preserves Homestead Status: For a primary residence, homestead exemption remains.
- Simple: Ladybird deeds are relatively simple and inexpensive compared to a trust.
For these reasons, a Florida lady bird deed can be an attractive option to transfer a home or other real estate while avoiding probate.
What Are the Disadvantages of a Lady Bird Deed?
While ladybird deeds offer benefits, there are some limitations to consider:
- No Protection from Creditors: Property remains subject to creditor claims during life.
- No Probate Avoidance for Other Assets: Only transfers real estate, not other property types.
- Beneficiaries Can Pre-Decease: If a beneficiary dies before the owner, complications can arise.
- Medicaid Issues: Transfers may impact Medicaid eligibility without proper planning.
- Homestead Use Requirement: Primary residence status requires continued residency by the owner.
- Can Be Challenged: Heirs may contest the validity of ladybird deeds.
For these reasons, lady bird deeds may not be suitable in all cases. Proper estate planning is important when using this type of deed.
Is a Lady Bird Deed Right for Me?
So, how do you know if a ladybird deed makes sense for your individual situation? Here are some instances when ladybird deeds are commonly used:
- To transfer a primary residence or second home to beneficiaries without probate.
- When probate needs to be avoided but assets are not substantial enough to justify a living trust.
- For Medicaid planning purposes, if done correctly.
- As a simple way to transfer a vacation property, investment property, or other real estate.
- To leave a residence to adult children from a prior marriage.
- To avoid sibling disputes over inherited property.
Consult an estate planning attorney to see if a ladybird deed fits into your overall estate plan. It can be revoked or modified later if circumstances change. With proper planning, ladybird deeds can help avoid probate and support estate planning goals.
Using a Lady Bird Deed for Medicaid Planning
A ladybird deed could be useful as part of Medicaid asset protection planning.
Under Medicaid estate recovery rules, upon your death, Medicaid can place a lien on property that was not your homestead. Usually, this means the state can force the sale of the property to repay benefits they paid for your care.
However, a ladybird deed transfers the property immediately upon death to your beneficiary outside of probate. Since the property avoids probate, it is not part of your Medicaid estate subject to recovery. The beneficiary receives it free and clear.
A ladybird deed, combined with properly structured ownership, can thereby protect secondary properties from Medicaid estate claims. Of course, consult with a Medicaid planning attorney when considering this strategy.
How to Create a Lady Bird Deed in Florida
If you decide a ladybird deed is the right fit, here are the steps to create one in Florida:
- Consult an attorney – Have a Florida estate planning attorney prepare the deed to ensure it is done correctly.
- Name parties – Identify the grantor (owner) and remainder beneficiaries. Include a contingency plan if beneficiaries die first.
- Describe the property – Use a full legal description of the real estate.
- Draft the deed – Include key provisions like enhanced life estate and homestead protection.
- Sign the deed – Sign in the presence of two witnesses and a notary. Have witnesses sign.
- Record the deed – Record the original signed and notarized deed with the county.
- Update estate plan – Review beneficiary designations, will, etc., to coordinate with the deed.
By taking these steps, you can properly create and record a ladybird deed in Florida. Be sure to work with a qualified attorney for assistance.
Florida Lady Bird Deed Lawyers Can Help
A ladybird deed can be a valuable estate planning tool for Florida residents who own real estate and want to avoid the time and expense of probate. This unique enhanced life estate deed lets you control property during life but automatically transfers it at death.
However, ladybird deeds also have limitations, such as no creditor protection.
Work closely with an estate planning attorney to determine if a ladybird deed is appropriate for your situation as part of an integrated estate plan. With the right planning, a ladybird deed can help smooth the transfer of real estate to your heirs and reduce hassles for loved ones.
Does your estate plan need a review? The estate planning lawyers at Stivers Law in Coral Gables can advise if a ladybird deed is suitable for your goals. Contact their office today to schedule a consultation.