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 bonnie repp,
you can file bankruptcy after 1 year of recording a ladybird deed. if you file bankruptcy within a year of recording a enhanced life estate deed (ladybird deed), then it may be considered as a fraudulent transfer.
as far as chapter 13 bankruptcy is concerned, you will be able to save the property however in chapter 7, you may or may not be able to save the property from the creditors.
if your home equity is higher than the state exemption, then the bankruptcy trustee will sell off the property and give you the exempted amount and pay off the rest to your lender after deducting his fee. to know more about exemptions, check out the following link:
http://www.mortgagefit.com/bankruptcy.html#keep-home
you should remember that though you file a enhanced life estate deed, the property will remain yours till you are alive. it's after your death that the property will go to the beneficiary.
you can file bankruptcy after 1 year of recording a ladybird deed. if you file bankruptcy within a year of recording a enhanced life estate deed (ladybird deed), then it may be considered as a fraudulent transfer.
as far as chapter 13 bankruptcy is concerned, you will be able to save the property however in chapter 7, you may or may not be able to save the property from the creditors.
if your home equity is higher than the state exemption, then the bankruptcy trustee will sell off the property and give you the exempted amount and pay off the rest to your lender after deducting his fee. to know more about exemptions, check out the following link:
http://www.mortgagefit.com/bankruptcy.html#keep-home
you should remember that though you file a enhanced life estate deed, the property will remain yours till you are alive. it's after your death that the property will go to the beneficiary.
You say a Ladybird deed entitles one to the "step up basis". Does a regular life estate have the same entitlement in California?
Thank you!
Thank you!
Hi Mary,
Just as a ladybird deed, a regular life estate entitles one to the "stepped up" basis of the property value.
may god bless you.
Samantha
Just as a ladybird deed, a regular life estate entitles one to the "stepped up" basis of the property value.
may god bless you.
Samantha
NEED QUICK ANSWER PLEASE! mom has a ladybird deed and her kids are on it. If mom passes away, and one of the kids has a judgment against them (creditors chasing them) can they put a lien on the house if none of the other kids have a judgment against them?
Hi Julie,
Yes, the creditors may place lien on the property if one the kids has a judgment against him/her. This is because, like all other siblings, he/she will also be an owner of the property after their mom passes away.
Thanks,
Jerry
Yes, the creditors may place lien on the property if one the kids has a judgment against him/her. This is because, like all other siblings, he/she will also be an owner of the property after their mom passes away.
Thanks,
Jerry
Can I claim the home of a deceased person and take over if there is no will, no heirs, no one handling estate? Home is paid for, can't find the deed. Owner was a bit mentally ill never wanted anyone to help out & now has passed away leaving home with no one. Will the home go to the state and how will they ever know he had property if no heirs are around to claim home?
if owner is currently in a nursing home with medicaid benefits & wishes to sell home if it is made into a lady bird deed to his heirs can it be sold & money go to heirs prior to death & not be subject to medicaid taking the proceeds ?
Welcome,
To LoveBug,
If you are the heir to that property, then you can file an affidavit of heirship at the county recorder's office to claim the property. I guess, before recording the affidavit of heirship they will investigate whether you are the legal heir to the property or not.
To C Allen,
As far as I know, a ladybird deed doesn't make you ineligible for Medicaid as long as you express your intent to return. And even if you do not express the intent to return, your home may be considered as an exempt asset for Medicaid eligibility if your spouse or relative occupies it. But I don't think you will get Medicaid benefits if you sell off the property.
To LoveBug,
If you are the heir to that property, then you can file an affidavit of heirship at the county recorder's office to claim the property. I guess, before recording the affidavit of heirship they will investigate whether you are the legal heir to the property or not.
To C Allen,
As far as I know, a ladybird deed doesn't make you ineligible for Medicaid as long as you express your intent to return. And even if you do not express the intent to return, your home may be considered as an exempt asset for Medicaid eligibility if your spouse or relative occupies it. But I don't think you will get Medicaid benefits if you sell off the property.
I need to know if there is indeed an attached medicaid 'transfer' penalty when you have the lady bird deed, or if this penalty can NOT be attached if you have the lady bird deed. Plz. someone answer this question. I have read conflicting statements on this site, on this subject. One says yes, one says no....? What is the truth regarding this subject? This involves a home, medicaid, and nursing home in the future. This is in Texas.
Is there a medicaid penalty for tranfering a home to a chid when the lady bird deed is used? Does it matter if the deed is made before one files for medicaid or after? (in Texas)
You can use a ladybird or enhanced life estate deed in order to transfer your property to the heirs. It does not make you ineligible for Medicaid as long as you want to come back to your property. Even if you do not come back to the property your home may be considered as an exempt asset for Medicaid eligibility if your spouse or relative occupies it. To know more whether Ladybird deed causes Medicaid penalty, check out the following page:
http://www.mortgagefit.com/texas/ladybirddeed-medicaid.html
http://www.mortgagefit.com/texas/ladybirddeed-medicaid.html
how to you figure the amount of gift tax owed on the amount over the annual $12,000 exclusion please? I want to quickclaim my partner to my condo deed, and visa versa. Both condo's $75,000 purchase price, 3 mths ago. We just want to add each other's names to our properties. We each have our own mortgages. We should have done this at purchase, but didn't . How should we go about this please.
You will have to deduct the $12,000 (annual gift exemption) from the total amount of gift received. Taxes will be calculated on the amount that you receive after deducting the $12,000.
To Snorkelcat,
You are allowed to give a total of $1,000,000.00 over the course of your lifetime without owing any gift taxes. However, if the amount of the gift in any one year exceeds the $12,000.00 annual exemption, you will simply have to file a gift tax return with the IRS (I've forgotten the form number). But you will NOT owe any taxes. This is how it works when giving a gift of cash, so I assume that it probably would be the same with property. But I also know nothing about quickclaim deeds. You might want to consult an attorney and/or accountant just to be sure. Also, the IRS is very helpful if you call them and ask for their department that specializes in estates and/or gift taxes. I usually call 800-829-1040. Hope this helps.
You are allowed to give a total of $1,000,000.00 over the course of your lifetime without owing any gift taxes. However, if the amount of the gift in any one year exceeds the $12,000.00 annual exemption, you will simply have to file a gift tax return with the IRS (I've forgotten the form number). But you will NOT owe any taxes. This is how it works when giving a gift of cash, so I assume that it probably would be the same with property. But I also know nothing about quickclaim deeds. You might want to consult an attorney and/or accountant just to be sure. Also, the IRS is very helpful if you call them and ask for their department that specializes in estates and/or gift taxes. I usually call 800-829-1040. Hope this helps.
if my parents have a quitclaim deed already oo we need a ladybird deed