Lady Bird Deed

What is a Lady Bird deed?

A Lady Bird deed, also called an enhanced life estate deed, names someone to automatically receive property when the owner dies. Unlike a traditional life estate deed, it lets the property owner, also called the life estate holder, keep full control during their lifetime, including the right to sell or mortgage it. 

Property owners who want to keep things simple for their heirs use Lady Bird deeds to avoid probate court. They’re also useful for seniors planning for Medicaid benefits or those trying to protect their home from estate recovery.  

A Lady Bird deed usually includes:

• Detailed description of the real property
• The names of the life estate holder and beneficiary
• A statement that the life estate holder reserves lifetime rights to sell the property
• Signatures of both parties (some states may also require notarization)

One key benefit of a Lady Bird deed is that you don’t have to report the transfer to Medicare. Because you retain ownership until death, it isn’t considered a gift or transfer that affects your Medicaid eligibility.

It may also help prevent Medicare from making a claim against your probate estate to recover nursing home costs. This doesn’t work in every situation, so it’s wise to speak with an attorney.

Lady Bird deeds and enhanced life estate deeds are only recognized in Florida, Michigan, Texas, Vermont, and West Virginia. Other states may use traditional life estate deeds or other tools to transfer property, but they follow different rules.

FAQs

Does a Lady Bird deed override a will?

In most cases, yes. When the property owner dies, a life estate deed (like a Lady Bird deed or even a standard life estate deed) automatically transfers the property to the beneficiary, removing it from the probate estate. Wills can only distribute property that is still in the estate, so the Lady Bird deed takes priority. There are exceptions, however, so check with an attorney.

What are the disadvantages of the Lady Bird deed?

Lady Bird deeds and enhanced life estate deeds aren’t recognized in most states, and they may not provide protection from estate recovery. They can also create issues if you later want to change the beneficiary.

Do you pay taxes with a Lady Bird deed?

You don’t usually owe gift tax because the transfer doesn’t take effect until death. However, the beneficiary may have to deal with tax consequences like property taxes or taxes on capital gains, depending on the situation.

What is the difference between a Lady Bird deed and a trust?

A Lady Bird deed is a type of property deed that transfers a single piece of real property directly to a beneficiary upon death, while letting the owner keep full control during their lifetime. Setting up a trust, on the other hand, creates a new legal entity that holds property and other assets. Both are common estate planning tools that help avoid probate court and estate recovery efforts.