Real estate transfers: Is a 'Lady Bird deed' right for me?

Enhanced life estate deeds, affectionately nicknamed Lady Bird deeds, can be an effective tool in real estate to transfer ownership of real property upon death. They got their nickname when President Lyndon B. Johnson used one to convey property to his wife, Lady Bird Johnson.

As Lady Bird deeds grow in popularity, it is important to discuss and understand the benefits and limitations of these deeds.

Enhanced life estate deeds vs. life estate deeds

While Lady Bird deeds are a type of life estate deed designed to automatically transfer property ownership upon death of the original owner to another individual, Lady Bird deeds do not require the original owner to give up use, control, or ownership of the property while alive.

The beneficial receiver of the property upon death does not obtain any immediate rights or ownership interests in the property, and their consent is not required to sell, convey or change the use of the property while the original owner is alive. If the original owner sells or conveys the property at any point in their lifetime, the Lady Bird deed is rendered obsolete. On the other hand, if the original owner passes away, the property subject to the Lady Bird deed is automatically conveyed to the beneficial recipient without needing to pass through probate.

With a traditional Life Estate deed, the original owner is required to give up control when adding a beneficial recipient. This means the original owner is prohibited from selling, conveying, or encumbering the property without explicit consent from the beneficial recipient. Furthermore, the original owner cannot change or terminate a traditional Life Estate deed without consent from the beneficial recipient.

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Pros of a Lady Bird deed:

• Properties can be conveyed upon death without having to pass through probate.

• The original owner remains in full control of the property during the time they are alive.

• Recording a Lady Bird deed does not affect the current owner’s homestead protection and exemptions.

• Significant Medicaid planning benefits. Any property subject to a Lady Bird deed do not violate Medicaid’s five-year look-back period and are not subject to gifting taxes or penalties since the beneficial owner does not immediately possess any ownership rights.

Cons of a Lady Bird deed:

• Does not circumvent Florida statute 732.401, which requires homestead property to be conveyed first to a surviving spouse or minor child(ren).

• Does not protect non-homestead properties from any judgement liens issued against the original owner during their lifetime.

Lady Bird deeds can be an effective tool to transfer property outside of probate. As in any real estate transaction or estate planning endeavor, it is always best to consult with a knowledgeable attorney to discuss your desired outcome and best course of action.

Stephen J. Lacey, JD, LLM, is a member of the law firm Lacey Lyons Rezanka. His practice areas focus on estate planning and probate.

This article originally appeared on Florida Today: What is a 'Lady Bird deed' and is it a good real estate tool for me?