does lady bird deed avoid probate

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The key objective of probate avoidance estate planning is to ensure that assets are passed on to others without the need for administering a will through the court system after the death of the life tenant.

In Florida, Revocable Living Trusts are one of the most commonly used probate avoidance tools, but they can be very expensive to draft. An enhanced life estate deed, however, provides an excellent alternative for those with limited assets and/or who may find revocable trusts cost-prohibitive.

Florida is one of only a few states to permit the use of an enhanced life estate deed (commonly referred to as a “Lady Bird” deed) for probate avoidance purposes. (Trivia tip: The Lady Bird deed was named after Claudia Alta “Lady Bird” Johnson, wife of the 36th U.S. President Lyndon B. Johnson, after the attorney who first created the concept used Johnson’s name in an example to explain how such deeds work!)

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What is the Florida Lady Bird deed?

A Florida property owner can automatically transfer their property to others upon their death with a Florida Lady Bird deed, formerly known as an Enhanced Life Estate Deed, while still retaining use, control, and ownership of the property while they are still alive.

A Lady Bird deed gives a person an improved “life estate” interest in real estate, with the “remainder” interest going to a successor upon their death.

During their lifetime, the owner of the “life estate” is granted continuous control over the asset, enabling them to sell, utilize, and dispose of it as they see fit without consulting the other beneficiaries.

The remaining beneficiaries are not entitled to the subject property, and selling it while the life estate holder is alive does not need their approval.

When a life estate holder passes away, the property automatically transfers to the remaining beneficiaries provided the Lady Bird deed is still in effect and the surviving beneficiary did not transfer the property during their lifetime. This eliminates the need for the probate court to oversee the property’s administration. This is actually the primary advantage of owning a Lady Bird deed as opposed to a standard life estate deed.

How does a lady bird deed work?

One estate planning technique that prevents your property from passing through probate, a public legal process that divides assets after your death and can be expensive and time-consuming, is the lady bird deed.

The ownership of your house is split into two parts by lady bird deeds: during your lifetime and after your passing.

  • Control throughout life: As the property’s life tenant, you are free to do with the house as you please. In contrast to conventional life estate deeds, you are free to modify your decision at any time, including selling or mortgage the asset, without obtaining your beneficiaries’ consent.
  • At death, the property automatically passes to the beneficiary or beneficiaries you named in the deed, who may be an individual or a trust. They may be called remainder beneficiaries.
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Pros and cons of a lady bird deed

  • Avoid probate. When an owner passes away, the property is no longer subject to probate thanks to lady bird deeds, which remove it from the owner’s estate.
  • Throughout your life, you will be able to use, sell, and profit from the property. A lady bird deed may be amended at any moment without the beneficiaries’ consent. Only after the original owner has passed away are they able to make decisions regarding the property.
  • Maintain Medicaid eligibility. Medicaid may still count property transferred to another person within five years of your application, so you might not be eligible for full benefits. Lady Bird Deeds won’t impact your eligibility because they aren’t regarded as a transfer for Medicaid purposes.
  • Prevent property from being used to repay Medicaid benefit costs. U. S. According to federal law, states are permitted to inherit a person’s assets in order to pay for long-term care through Medicaid. The property does not count toward your estate and is not governed by the Medicaid estate recovery plan, or MERP, in states where lady bird deeds are available. Medicaid. gov . Estate Recovery. Accessed Feb 28, 2023. View all sources .
  • Avoid federal gift tax. Giving something to someone else, like your adult child, could be considered a gift, and you might need to file a gift tax return with the IRS (in certain situations, you might even need to pay the gift tax). Lady Bird deeds help avoid gift tax regulations by transferring the property until your death.
  • Avoid property taxes. In certain states where the lady bird deed is accessible, property tax assessors are limited in their ability to raise a property’s taxable value. Setting up a lady bird deed that transfers property upon your death can prevent you from losing this tax benefit, as this cap may reset if the property transfers (for example, through a sale).


What are the disadvantages of the ladybird deed?

Disadvantages. The downside is that property transferred via a lady bird deed will be subject to a new tax assessment that could (and often does) result in higher property taxes generally.

What is the purpose of a ladybird deed?

A lady bird deed is a type of life estate deed that lets the owner maintain control of a property until their death, when the property automatically transfers to a beneficiary without going through probate. It is also called a ladybird deed or an enhanced life estate deed.

Does Lady Bird deed avoid capital gains tax?

Lady Bird Deeds and Capital Gains Taxes When a property is inherited by a Lady Bird Deed, the beneficiaries receive a stepped-up tax basis. What does this mean? It means the property’s value for capital gains tax purposes is modified to its fair market value at the time of the owner’s death.

What is the difference between a lady bird deed and a life estate?

Lady Bird Deeds differ from Traditional Life Estate Deeds in that a beneficiary has no right to the home (or decisions made in regards to it) as long as the homeowner is alive. This means the life tenant can mortgage or sell their home without beneficiary consent.