What is a Lady Bird Deed? (or Enhanced Life Estate Deed)

by Kellen Bryant

What is a Lady Bird Deed?

Also known as an Enhanced Life Estate.

So let us first start on the discussion of what’s a life estate. Then we will go one step further to explain what is an Enhanced Life Estate or Lady Bird Deed. So first…

What is a life estate?

A life estate relates to real estate and your real estate interest. So to create a life estate, you are changing the deed and changing the ownership structure of the deed.

 

To watch my video explaining what a Lady Bird Deed is, click here.

For Example:

If I own a rental house now and it’s only my name on the deed, I can sign a new deed saying that I own the property for life, and then upon my death the property goes to my sister.

I pass away.

So, then when my death certificate is filed, that means my sister owns that property. She does not have to go to a probate court in order to get ownership of the property.  She can now do whatever she wants with the real estate.

Ultimately, people do life estates in order to avoid having the cost of probate court after somebody dies.

The downside of a life estate is that, in my example, I have a life estate. My sister has the remainder ownership interest. If I wanted to sell that property, my sister has to sign on the deed of sale to sell that property. If my sister dies, her interest will go according to either her will, her trust, or her estate — he estate will need to be probated. Then, that person is my new remainder owner who must sign.

Now, if I wanted to refinance the property, then I also need her signature on the deed to refinance, as well as on the mortgage. So that’s why it creates a problem of having a plain life estate.

To cure that problem, we have what is known as a Lady Bird Deed or Enhanced Life Estate.

The Lady Bird Deed is a type of life estate with one great exception. There is extra language in the deed that says that I, the creator of the life estate, can take back or change the remainder owner.

So what that allows me to do in my scenario, is, if my sister refuses to sign the deed to sell the property, then I can change it to my brother who said he’ll sign with me. My brother can then sign the property and then sell the property.

Why do that?

You can do that in the case if you’re applying for Medicaid as it relates to your house to avoid probate, and that’s the main thing to do, and provides a little bit of flexibility in case something happens to the remaindermen or remainder beneficiaries.

Also, a lady bird deed is commonly used near end of life, or while someone is in a nursing home.  By signing the lady bird deed, you will not have any Medicaid problems down the road.

A lady bird deed is normally appropriate when someone is at the end of life.  A healthy 73 year old may not want to do this.

A lady bird deed can create tough situations with large families, or if you want to have multiple beneficiaries.  If you have 3 or more children or beneficiaries, then a revocable living trust may be a better tool to avoid property.  The revocable living trust will help will property management issues down the road.

When a sale after death is not going to be immediate, then issues can arise such as:

  • When to sell?
  • How to sell it for?
  • Who collects rent?
  • Who pays and keeps up the property before sale?
  • Who is going to create a headache because he or she won’t sign, or is lazy?
  • What if a family member is essentially squatting?

A lady bird deed does not best address these concerns.

If you’re interested in Life Estate Deed, Enhanced Life Estate Deed, Lady Bird Deed, it’s best to find an elder law attorney in your area to help you prepare the life estate or Lady Bird Deed. If you need help in finding the right attorney for you, you can buy my book on Hiring the Right Estate Attorney on Amazon.

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