Tampa Lady Bird Deeds Lawyer
A Lady Bird Deed, also known as an Enhanced Life Estate Deed, is a way to transfer your real property upon your death economically and without the need for probate. Florida, unlike most states, expressly allows this value tool as a way to hold your interest in Florida real property.
A Lady Bird Deed creates a life estate interest in the property for the current property owner, meaning the current owner maintains full use and control of the property during their lifetime, and creates a remainder interest that passes the property automatically to your named beneficiaries, called remaindermen, upon your death.
Life Estate Deeds Versus Lady Bird Deeds
A Lady Bird Deed is a type of life estate deed. While both a Lady Bird Deed and a traditional life estate deed are tools to avoid probate, traditional life estate deeds do not allow the life estate holder to sell, transfer, or encumber the property, or terminate the interest of the remaindermen without obtaining consent of the named remaindermen. Lady Bird Deeds retain all those powers with the life estate holder, making them more flexible for the life estate holder and, often more importantly, allows the life estate holder to retain all its rights in the property.
What Are the Advantages of a Lady Bird Deed?
There are many advantages of a Lady Bird Deed. These include:
- Avoids Probate. The Lady Bird Deed allows your property to automatically transfer to the named remainderman upon your death without the need for a probate.
- Inexpensive. Obtaining a Lady Bird Deed is relatively inexpensive, especially when compared to the cost of creating a trust or having to file a probate.
- Revocable. The owner of the property can change their mind at any time, while living, to end the Lady Bird Deed in its entirety, sign a new deed giving the remainderman interest to someone else, mortgage the property, or even sell the property. All of this can be done without the consent of the remainderman.
- Preserve Homestead Benefits. Signing a Lady Bird Deed allows you to keep the homestead rights on your property. This means you don’t lose your homestead exemption on your real property for tax purposes and there is no change in the amount of property taxes due on traditional deed transfers. Aside from the homestead exemption benefit for taxes, this also keeps your homestead protection against forced creditor sales of your property.
- Preserve Medicaid Eligibility. In Florida, Medicaid looks at all of your assets to determine your Medicaid eligibility. However, your homestead is typically not included as an asset for Medicaid eligibility. Additionally, as a property held under a Lady Bird Deed passes to remainderman outside of probate, the property is not included when the state determines what it can recover for Medicaid expense reimbursement from your estate. This is useful for non-homestead properties that would otherwise be subject to probate and creditor claims.
- Tax Benefits. Unlike a traditional life estate deed, because the interest of the remainderman is revocable, transfers of the future interest through a Lady Bird Deed do not count as a gift under the federal gift tax rules. Furthermore, the remainderman in the Lady Bird Deed are eligible for the benefit of a step-up basis in the property. This means that if the remainderman ends up selling the property, the remainderman would only pay income taxes on the rise in value of the property from the date of your death.
What Are the Disadvantages of a Lady Bird Deed?
- Florida does not allow the transfer of homestead property to anyone if there is a surviving spouse of minor children. Any attempt to transfer the homestead away from your spouse, without the spouse’s joinder, would render the transfer void.
- If the remaindermen named in the Lady Bird Deed predecease you, it’s possible the property may have to go through probate.
- Despite the remaindermen in a Lady Bird Deed having no vested, current interest in the property, some less experienced title insurance companies or stubborn lenders may require the remaindermen sign a release if you wish to have a title insurance policy issued. Similarly, potential buyers may want a quit claim deed from the remaindermen if they are worried about having clear title on the property. These reasons make it especially vital that the language used in your Lady Bird Deed clearly and unambiguously reserves all of your relevant rights. This is why it’s important to have an experienced Florida real estate law attorney prepare the Lady Bird Deed for you.
Conclusion
Lady Bird Deeds are a very useful and cost-effective tool for probate avoidance in the right situations. To determine if a Lady Bird Deed is best suited for your needs, contact the experienced Tampa real estate lawyers at Messina Law Group, P.A. today.
