Estate planning can be a complex task, especially when transferring property to your heirs. One option to consider is a Lady Bird deed, otherwise known as an enhanced life estate deed. It allows a property owner to retain control of their property during their lifetime and then transfer it to one or more people (beneficiaries) after their death.
Let’s examine the Lady Bird deed and its benefits in this article.
Lady Bird Deeds vs. Life Estate Deeds
A Lady Bird deed is similar to a life estate deed as it splits ownership into two different time periods. However, there are three major differences between both deeds:
- When using a life estate deed, the owner needs to get consent from all the beneficiaries to sell or modify the property. However, owners don’t need permission when using a Lady Bird deed.
- A Lady Bird deed also allows owners to terminate beneficiary rights quickly. Since a life estate deed gives more power to the beneficiaries, the termination process becomes complicated.
- The owners also need not maintain the property for the heirs or beneficiaries when they use a Lady Bird deed.
Benefits of a Lady Bird Deed
The are four important benefits of using a Lady Bird deed:
- Probate
A Lady Bird deed allows the property owner to avoid probate. The legal process to transfer assets to heirs after someone passes away can be time-consuming, costly, and public. A Lady Bird deed transfers the property directly to the beneficiaries with minimal documentation.
- Medicaid Planning
Florida and other states consider your property for Medicaid eligibility. Since the Lady Bird deed allows owners to retain most property rights, it will not affect your Medicaid plan. However, consulting an estate planning lawyer with Medicaid knowledge is essential to ensure it’s implemented properly.
- Homestead Rights
The primary residence owned and occupied by a person, a homestead, will get tax exemptions in Florida. You will not lose any existing homestead benefits when using a Lady Bird deed. Since the transfer doesn’t trigger a reassessment of the property value, you can maintain the affordability and stability of your primary residence.
- Stepped Up Basis
A Lady Bird deed includes the property in an owner’s estate for tax purposes. The deed treats the property as an inheritance when the owner dies, so it helps beneficiaries save income tax because it erases any appreciation that the property may have accrued.
Creating a Lady Bird Deed
A Lady Bird deed might look straightforward, but you might not get many benefits if it doesn’t have the correct language. Since Florida and other states that recognize the deed have specific requirements, consulting with an experienced attorney is better.
If you need assistance with Lady Bird deeds or other estate planning needs, reach out to KousLaw PLLC. With guidance from Michael G. Koukotis, our experienced attorneys can help you navigate the complex legal landscape and protect your assets. Contact us today to schedule a consultation.