An Enhanced Life Estate Deed, popularly known as a “Lady Bird Deed,” permits an individual to convey an interest in their property to someone else while still retaining rights (including ownership) over that property for as long as they live.
This arrangement, which is known as an “enhanced” life estate, not only gives the owner control over the property during his or her lifetime, but it allows them to designate the beneficiary (i.e., future interest holder) to receive the property after their death without the need for the beneficiary to have to go through the probate process.
However, before running to get a Lady Bird Deed drafted and signed, take a moment to fully learn what it entails and how an attorney can help you make the final decision.
What Are the Pros of a Lady Bird Deed in Florida?
One main advantage of a Lady Bird Deed is that once it is signed—and therefore goes into effect—the beneficiaries of the property will not have to go through the probate process to obtain title to the property. This saves considerable time and money, as probate is a court process that can be lengthy and expensive.
The other key advantage is that so long as the owner is still alive, they have the right to sell the property, use it as collateral for a mortgage, lease the property, or dispose of it as they see fit—they do not need to obtain the consent of the future interest holder. Thus, the life estate holder maintains full control during their lifetime.
Other benefits include:
- The Lady Bird Deed does not require the life estate holder to pay documentary stamp taxes, even if there is an underlying mortgage;
- One of the most common tax benefits in Florida is the homestead exemption, and a Lady Bird Deed does not affect your eligibility, since it creates a “remainder interest” that materializes only when the owner of the homestead property dies. Thus, if the property otherwise qualifies for a homestead, it will remain recognized as such under law.
- You are able to receive 100% of the income from the property should you decide not to live there and rent it out instead.
- Holding title via a life estate deed should not disqualify you from receiving Medicaid benefits that you are otherwise entitled to receive.
Finally, a Lady Bird Deed is far less expensive than a trust or other estate planning tool, as it takes less time and effort to draft.
What Are the Cons of a Lady Bird Deed in Florida?
Like any strategy or tool, there are weaknesses and limitations to a Lady Bird Deed, which will depend on your circumstances or needs.
When the owner of a property signs a Lady Bird Deed, the beneficiaries named to receive the property upon his or her death are known as “remaindermen.” If the life estate holder owes money to creditors, the life estate created by a Lady Bird Deed will not preclude the creditor from attaching a lien to the property interest. Hence, if the remaindermen decide to sell the property after inheriting it, any lien that is still attached to the property must be released and satisfied prior to the closing.
Another disadvantage is that once the life estate holder passes away and the beneficiaries become the owners of the property, they may disagree as to what to do with the property (i.e., rent it, sell it, live in it, etc.). If this is a concern of the life estate holder, a trust may be a better vehicle to transfer the property upon death.
A possible con is if the holder of the remainder interest dies before the life estate holder dies, it may be legally unclear as to what happens to the property when the original life estate holder later dies. There are ways around this scenario though, including for the future interest holders to hold title as “joint tenants with rights of survivorship”.
Pros and Cons of a Lady Bird Deed in Florida – Consult with an Expert Attorney Today
For all its potential benefits, there are many factors to consider before committing to a Lady Bird Deed. Weighing the pros and cons with respect to your individual needs is best done with the advice and guidance of an experienced real estate attorney.
We have the expertise to advise you on whether a Lady Bird Deed is the right fit for your estate planning needs. To schedule a free consultation, contact Attorney Jennie G. Farshchian by calling (305) 901-5628 or (239) 935-8599 or send us an email at Info@JFRealEstateLaw.com.