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The Advantages of the Lady Bird Life Estate Deed

The Lady Bird Life Estate Deed is a popular estate planning

deed option because of its many advantages. A Joint Property

Deed with survivorship is also popular.

 

A Lady Bird Deed is a life estate deed in which you as the owner or owners [grantors] give yourselves an unrestricted power of control plus a life estate, and upon your passing, you name certain family members or other loved ones [often named in a Living Trust] as beneficiaries to receive the home, camp or other land automatically without the need for a probate process. 

A Lady Bird Deed offers these important advantages: 

  • Since the gift over to the Living Trust or your named loved ones happens automatically upon your passing, the cost and delay of court-supervised probate are avoided. 

  • Since you as the grantors retain the unrestricted power of sale, you retain complete control during your lifetimes and can sell the property without the permission of the named beneficiaries and the divorce and creditor claims of the beneficiaries will not affect your property. 

  • If you use a Lady Bird Deed for you home, you can avoid losing the home if you enter a nursing home and need public benefits because the home continues to enjoy the homestead Medicaid exemption and  the five-year penalty period does not apply to Lady Bird Deeds.  

  • The use of a Lady Bird Deed allows you to maintain the homestead exemption [called the PRE] for the school tax part of property taxes—typically saving about 50%. 

  • A Lady Bird Deed also allows you to avoid uncapping the freeze on the taxable value of land—preventing a nasty increase in property taxes to the higher State Equalized Value [SEV]. 

  • Finally, a Lady Bird Deed gives your loved ones an income-tax free inheritance—allowing them to sell inherited real estate with no tax. 


But the Lady Bird Deed has these drawbacks:

  • A surviving spouse has complete control of land under a Lady Bird Deed. If the survivor remarries, the family home and other land are exposed to interference and claims of the second spouse. A better option is a joint property deed or living trust. 

  • If your capacity diminishes later in life, the fact that you’ve maintained complete control exposes your home to scam artists and bad people who want to take your property. A better option is a joint property deed or living trust. 

  • If the property in question is a second home, a rental property, cottage, camp or vacant land, you will lose this property if you enter a nursing home and need public benefits. A better option is a joint property deed or legacy trust, as long as it is in place for 5 years. 

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