Highlights:
-A Florida lady bird deed is an easy and cheap way of passing property to your heir while avoiding probate.
-The lady bird deed gives the homeowner a life estate in their property and names their heir to succeed them as owner.
-The lady bird deed is also known as an enhanced life estate deed because the life tenant retains the ability to sell or mortgage the property.
Definition of a Florida Lady Bird Deed
A lady bird deed conveys a property that someone owns outright to the same person as life tenant, then to his heirs upon his death. The transfer of property interests takes place before the life tenant’s death, so there is no need for a probate after his death.
An owner who becomes a life tenant under a lady bird deed retains control over his property. If the property is his homestead, it will retain the Florida homestead protection against creditors after the deed is recorded.
A lady bird deed is much more flexible than a life estate deed. An ordinary life tenant only retains the right to live in the property (he can not sell or mortgage it without the consent of his heirs). An enhanced life tenant under a lady bird deed, however, retains control over his property. He can mortgage or sell the property without the consent of his heirs.
The interests of the heirs (remaindermen) who inherit under a lady bird deed vest when the life tenant dies. This means that the heris’ creditors can not place a lien against their interests in the property until they actually become owners.
Florida common law principles of life estates and property conveyance support the use of a lady bird deed.
Drafting and Recording a Lady Bird Deed
A valid Florida Lady Bird Deed must meet certain requirements to be effective:
Parties: The deed must clearly identify the grantor (the homeowner transferring the property), the life tenant (usually the same as the grantor), and the remaindermen (those who will inherit the property).
Legal Description: The deed must contain the precise legal description of the property, which can be found in the original deed or title documents.
Execution: The deed must be signed by the grantor in the presence of two witnesses and a notary.
Recording: After being properly executed, the deed must be recorded in the county public records where the property is located.
Many Florida attorneys charge between $350 and $450 to draft and record a Lady Bird Deed, making it an affordable estate planning tool.
Advantages of a Lady Bird Deed
Avoids Probate: The most significant benefit of a Lady Bird Deed is that it avoids the need for probate, allowing the property to transfer directly to heirs without court involvement.
Low Cost: Compared to setting up a living trust or going through probate, the cost of creating and recording a Lady Bird Deed is minimal.
Retains Flexibility: The homeowner can change their estate plan at any time by selling, mortgaging, or re-deeding the property without the consent of the remaindermen.
Protects Assets from Medicaid Recovery: If the deed is executed before applying for Medicaid, the property can be shielded from Medicaid estate recovery, preserving it for heirs.
No Gift Tax: The transfer does not trigger any immediate gift tax liability, as the homeowner retains full control over the property during their lifetime.
Asset Protection: a lady bird deed protects the property from the creditors of the heirs until they inherit it.
Disadvantages of a Lady Bird Deed
1. May Not Be Suitable for Multiple Heirs: If the property is being passed to several heirs, a Lady Bird Deed can lead to conflicts and complicate future decisions about the property.
2. No Contingent Beneficiaries: The deed is not designed for use in situations where a series of contingent beneficiaries is desired (for example, leaving property first to a spouse and then to children if the spouse dies first). In that situation, you should use a trust instead.
3. Objections from Mortgage and Title Companies (Rare): As stated above, lady bird deeds have been recognized as valid by Florida courts. However, sometimes title companies and mortgage lenders who have not previously dealt with a lady bird deed have questions as to their validity.
Examples of a Lady Bird Deed in Estate Planning
Example 1: Protecting the Family Home for a Surviving Child Sarah, an elderly widow, owns her home in Florida. She wants to ensure that her only daughter, Lisa, inherits the house without having to go through probate. Sarah executes a lady bird deed that transfers the home to herself as a life tenant and names Lisa as the heir. Sarah lives in the house the rest of her life. Upon Sarah's death, the home automatically passes to Lisa, avoiding probate.
Example 2: Preserving a Vacation Property from Medicaid Recovery John owns a vacation home in Florida that he wants to leave to his two adult sons. John is concerned about needing long-term care through Medicaid and Medicaid then taking his property as reimbursement after he dies. John creates a Lady Bird Deed naming himself as life tenant and his sons as heirs. This allows him to retain control over the property during his lifetime while ensuring it passes to his sons directly upon his death, without being subject to Medicaid recovery.
In summary, a Florida lady bird deed is a convenient estate planning tool where you convey your property to your heir before you die to avoid probate.