Posted on: 29th Dec, 2006 12:07pm
Lady bird deed or Enhanced life estate deed is a legal document using which you can transfer property to your heirs while at the same time retaining a life estate along with the right to sell property in your lifetime. This implies that you will own the property till you die and if you'd like to sell, there's no need to notify your beneficiaries. Upon your death, your heirs or beneficiaries named on the deed will be able to take over the property without having to go through probate.
In which states is the deed applicable?
The enhanced life estate deed is acceptable in states like Florida, Texas, Ohio, California, and Kansas.
How does lady bird deed differ from life estate?
There are 2 ways in which an enhanced life estate differs from a regular life estate deed:
- Property sale: Unlike a ladybird deed which allows a grantor to sell property during his lifetime without the beneficiaries' consent, a regular life estate deed is one which doesn't allow you to sell without permission.
- Gift tax implications: A regular life estate allows the grantor to keep a life estate and transfer a remainder interest (estate that remains after grantor's death) to one who'll inherit property. The current owner has the right to occupy and use property. He is entitled to get all the money that can come from his property. But as per IRS rules, the grantor may have to pay gift taxes for transferring the remainder interest.
However, the grantor need not pay gift taxes if he uses a ladybird or enhanced life estate deed. This is so because the grantor has the unilateral right to cancel the remainder interest conveyed to the beneficiary.
How does one benefit from using lady bird deeds?
- Avoid probate: Unlike a Will that requires to be probated, a lady bird deed helps in conveying title without any probate at the time of the grantor's death.
- Protect from creditors: It protects the property from the beneficiaries' creditors during the grantor's lifetime. The creditors cannot place a lien on the property because the beneficiaries have no interest during the grantor's lifetime.
- No capital gains tax: The beneficiaries inherit property at a "stepped-up" basis, which is the value of the property on the day when the grantor passes away. If the beneficiary sells home, obviously there will be no capital gains and hence the grantee does not have to pay capital gains tax.
- Flexible rights: The grantor is legally entitled to sell or transfer property as a gift any time he wishes to do so. He may also take out a mortgage on the property or cancel the remainder interest.
Does ladybird deed affect Medicaid eligibility?
Using ladybird or enhanced life estate deed doesn't make you ineligible for Medicaid as long as you express your "intent to return" after being taken to nursing home. The "intent to return" can be expressed in the form of an affidavit or letter signed by you. Even if you do not express the "intent to return", your home may be considered as an exempt asset for Medicaid eligibility as long as your spouse or relative occupies it when you're not around. Check out if Ladybird deed causes Medicaid penalty.
Which is better - Ladybird deed or quitclaim?
Unlike ladybird deeds, a quitclaim with life estate does not allow the grantor to sell, mortgage or transfer property without the consent of the beneficiaries. The beneficiaries' creditors can easily place a lien on the property as the beneficiaries cannot claim the home as their homestead property. Moreover, if any beneficiary passes away or goes through divorce, his spouse can claim a share of interest in property. In some states, the quit claim or a life estate can even affect the validity of your homestead protection.
Using ladybird deeds make sense if you wish to convey property to your heirs directly without having to prepare a Will. In most cases, it may not affect your Medicaid eligibility. And, the deed offers maximum benefit to your beneficiaries when they take over your property.
Using ladybird deeds make sense if you wish to convey property to your heirs directly without having to prepare a Will. In most cases, it may not affect your Medicaid eligibility. And, the deed offers maximum benefit to your beneficiaries when they take over your property.
I have heard that lady bird deed can be used to avoid probate but not aware of the actual procedure for it. please help
Hi cargrijen,
Once your mother passes away, the homestead exemption will not remain valid. Whoever becomes the owner of the property will have to reapply for homestead exemption.
Thanks
Once your mother passes away, the homestead exemption will not remain valid. Whoever becomes the owner of the property will have to reapply for homestead exemption.
Thanks
My mother owns property in Texas but I am considering moving her to Maine because that is where I live now. So if she has a Lady Bird Deed prepared with me as the recipient (I am an only child) and her will is from Texas but she does move to Maine will this still protect her from Medicaid taking the property?
Hi Carolyn!
Welcome to forums!
Changing the place of residence may not affect her medicaid eligibility. However, transfer of property now may affect her eligibility criteria and she may have to wait for 5 years to claim medicaid.
Feel free to ask if you've further queries.
Sussane
Welcome to forums!
Changing the place of residence may not affect her medicaid eligibility. However, transfer of property now may affect her eligibility criteria and she may have to wait for 5 years to claim medicaid.
Feel free to ask if you've further queries.
Sussane
My parents (who are both deceased) home is in the Lady Bird deed. It is in my brothers name and the home is being sold and the proceeds will be divided up between 4 siblings. Will we have to pay taxes on the money we receive?
Hi Lucy,
As far as I can understand, the money that you receive from the sale of the property will be considered as your income. In such a situation, you'll be liable for paying taxes on that amount.
Thanks,
Jerry
As far as I can understand, the money that you receive from the sale of the property will be considered as your income. In such a situation, you'll be liable for paying taxes on that amount.
Thanks,
Jerry
I live in Michigan, am POA for 86 yr old parents, have taken care of them for 9 yrs, one with dementia and one in WC with stroke and parkinsins, keeping them home until one passes, is the lady bird good in Michigan
I don't think ladybird deed is valid in Michigan. You should contact a real estate attorney and take his help in knowing whether or not you'll be able to use the ladybird deed.
Welcome Darle,
It would have been better if you could have posted this in the Debtconsolidationcare forums. Nevertheless, as you've already sent the pm, I hope you'll receive a quick reply.
It would have been better if you could have posted this in the Debtconsolidationcare forums. Nevertheless, as you've already sent the pm, I hope you'll receive a quick reply.
can i use ladybird deed on vacant lots?
Hi mort!
Welcome to forums!
If your state laws permit, you will be able to use a ladybird deed in order to transfer the property to someone else.
Feel free to ask if you've further queries.
Sussane
Welcome to forums!
If your state laws permit, you will be able to use a ladybird deed in order to transfer the property to someone else.
Feel free to ask if you've further queries.
Sussane
rcan my mother get a ladybirddeed and also a will . we the adult children do not want to loose the house when she dies. she has being diagnose with dementia and who knows how long she will be able to remember things. she will be 79 years in two weeks. If she gets the lady bird deed or transfer the deed to one of her kids will it be o.k. how much does it cost. thank you hope you can answer my question cause she goes to the lawyer this coming week. sorry for the long letter.
sorry, to ask again, but can she have a will and also a ladybird deed. in which she can will her house to one or to all kids. they quote my sister a price of two thousand dollars. does that seem to much to you thanks again. bye
I have POA for my mom and was wondering if I can set up a ladybird deed to have her home deeded to myself and my brother upon her passing using my POA. We want to avoid probate and this seems to be the best way of doing that. help!
sorry, but I have another question. Can my mother have both a lbdeed and a will. naming one or all childrens on the deed or can it be only one. Also what is the difference on having power of attorney and a will or deed on my mother.thanks for your help. bye
Hi mariam,
Your mother can have a ladybird deed as well as a will. The cost of the ladybird deed will vary from state to state. You need to speak to a real estate attorney and he will let you know the cost of the property. If she used a ladybird deed to transfer the property to you, then there is no need for a will. If she wishes, she can include the names of all her children in the deed. A will comes into affect after the death of the grantor whereas a power of attorney will remain into affect as long as the person is alive. A property deed will immediately transfer the property to the grantee once it is signed and recorded.
To dtbm,
As you've a poa on your mother's behalf, you can sign a ladybird deed and get the property transferred in your name. This will help you in avoiding probate. You can contact a real estate attorney and take his help in this matter.
Thanks
Your mother can have a ladybird deed as well as a will. The cost of the ladybird deed will vary from state to state. You need to speak to a real estate attorney and he will let you know the cost of the property. If she used a ladybird deed to transfer the property to you, then there is no need for a will. If she wishes, she can include the names of all her children in the deed. A will comes into affect after the death of the grantor whereas a power of attorney will remain into affect as long as the person is alive. A property deed will immediately transfer the property to the grantee once it is signed and recorded.
To dtbm,
As you've a poa on your mother's behalf, you can sign a ladybird deed and get the property transferred in your name. This will help you in avoiding probate. You can contact a real estate attorney and take his help in this matter.
Thanks