Dealing with real estate can be one of the most complicated aspects of the life planning process. You want to make sure your intended beneficiary (or beneficiaries) can take title to the property at the right time with as little cost and hassle as possible, but you also want to make sure that you preserve the legal rights you need during your lifetime. Questions related to joint ownership, property tax, and various other issues can be confusing, and there is not one single answer that will work under all (or even most) circumstances.
“But wait,” you say. “What about a Lady Bird deed?”
If you are familiar with the concept of the Lady Bird deed (formally known as an enhanced life estate deed), kudos to you. While the Lady Bird deed has been around for a long time (it is named after Lady Bird Johnson, wife of President Lyndon B. Johnson, whose term ran from 1963 to 1969), it remains relatively unknown. Under the right circumstances, a Lady Bird deed can be an effective tool for bequeathing real property as part of an overall life plan. However, these deeds have certain limitations and drawbacks as well; and, as such, they do not provide a universal solution for efficiently transferring real estate at death.
The Lady Bird Deed: Overview and Benefits
A Lady Bird deed works as follows: The owner of the property executes the deed as the grantor. The owner also names the person who he or she wishes to take title to the property after his or her death as the grantee under the deed. The grantor reserves an enhanced life estate for themself. This allows the owner to retain full title to and control of the property during his or her lifetime; and, at the time of the owner’s death, the property passes automatically to the grantee with the “remainder” interest in the property, as a pseudo default beneficiary. This keeps the property out of probate, similar to placing the property in a trust, but it avoids the additional steps involved in placing a piece of real estate into a trust rather than owning it outright.
In Florida, executing a Lady Bird deed can also preserve the owner’s homestead tax benefits – provided that certain other requirements are observed. The fact that the default beneficiary does not take ownership until the original owner’s death also means that the default beneficiary’s creditors cannot place a lien on or seek to foreclose the property.
The Lady Bird Deed: Limitations
All estate planning tools have limitations, and this is certainly the case with Lady Bird deeds. For example, a Lady Bird deed will not work for homestead property when the owner has a spouse or minor children. Additionally, the IRS can attach a lien to the default beneficiary’s “remainder” interest in the property, and this can potentially create issues for the original owner and the default beneficiary. Lady Bird deeds can raise issues with regard to title insurance and various other matters as well; and, as a result, before choosing to incorporate one of these deeds into your estate plan, it is important to thoroughly discuss all relevant considerations with an experienced estate planning attorney.
Questions? Give Us a Call
Do you have questions about how to address your real estate in your estate plan? For a confidential consultation with Jacksonville estate planning attorney Mark F. Moss, please call 904-329-7242 or request an appointment online today.
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