As one of a few states that recognizes a Lady Bird Deed, Florida offers a flexible option for your estate planning needs.
Among the most versatile tools in your Florida estate planning toolkit is the Lady Bird Deed. Like all types of deeds, it allows for the transfer of property from one person to another. Yet it is unique in allowing you to convey ownership of a property to your beneficiaries upon death—without the need for probate. Learn how this amazing legal mechanism works and how our attorneys can help.
What is the Lady Bird Deed in Florida? – An Introduction
The term “Lady Bird Deed” is a nickname for an Enhanced Life Estate Deed, also referred to as a “Beneficiary Deed” or “Transfer on Death Deed”. With this legal arrangement, you can maintain full ownership and control of property during your lifetime while avoiding probate upon death.
The Lady Bird Deed is a type of life estate deed and it is executed no differently than a regular deed, with the person transferring the property (the grantor) signing the deed to effectuate the transfer to their beneficiary (the grantee).
The key difference is that the grantor continues to maintain full ownership of the property, being able to sell, mortgage, lease, and gift the property, and retain any proceeds it generates, for as long as they live. The deed comes into effect and transfers the property upon the grantor’s death.
Aside from Florida, only four other states currently permit the use of enhanced life estate deeds as estate planning tools: Michigan, Texas, Vermont, and West Virginia.
Advantages of a Lady Bird Deed in Florida
The biggest benefit of the Lady Bird Deed is that it allows you to keep the property for as long as you live. Hence, you will not have to choose between your residence and providing for your beneficiaries once you are gone.
More to the point, you can do whatever you want with the property in the meantime, from leasing it for cash flow, to selling it on the market. You may even transfer it to someone else. This addresses many of the uncertainties that can emerge during your lifetime after the deed is executed, giving you considerable flexibility in your long-term plans.
At the same time, when the inevitable happens, you can rest assured that your beneficiaries named in the deed (i.e., the future interest holders or remaindermen) will get the property automatically without having to endure the rigors of probate.
In addition to all the flexibility provided by an executed Lady Bird Deed, you also retain the right to change or revoke the deed at any time.
Tax Consequences of a Lady Bird Deed
Ordinarily, when a person makes a gift of over $18,000 (which amount is subject to change from year to year), the recipient may have to file a gift tax return with the IRS.
However, when someone transfers property using a Lady Bird Deed, this is not considered a gift in Florida. This is because, in essence, there is no actual transfer of current or present interest in the property, as the beneficiaries are neither co-owners nor sole owners.
Accordingly, since the beneficiaries only receive their share of interest to the property upon the sole owner’s death, it is possible to avoid gift tax consequences.
Bear in mind that a Lady Bird Deed will also not affect the homestead character of your primary residence, so long as the owner remains living in the property as their primary residence. Therefore, you can continue to receive the homestead tax exemption after you transfer the property via a Lady Bird Deed.
Likewise, when a property under a Lady Bird Deed is sold by the beneficiaries, the taxes that would be paid by the beneficiaries on the sale may be minimal if a stepped-up tax basis is used.
With that being said, it’s important to consult with an accountant to understand what tax liabilities you or your beneficiaries may have, if any, prior to executing a Lady Bird Deed.
Is a Lady Bird Deed the Best Option for You? – Call Us Today
For all its advantages, the effectiveness of a Lady Bird Deed depends on the language used in the document. For example, the document must declare itself to be a deed from the owner to their beneficiary with unrestricted power to convey the property during their lifetime. It must also specify that if the owner has not conveyed the property prior to their death, the property will be automatically conveyed to those named as beneficiaries on the deed. If this language is missing, ambiguous, or incorrectly written, it can render the deed ineffective, putting your otherwise effective estate plan into disarray.
Similarly, many people make the mistake of adding their children to the Lady Bird Deed as co-owners of a property to avoid probate. However, doing so can lead to many more problems, such as needing everyone to agree when transferring the property, or if one of the co-owners incurs bankruptcy or is subject to litigation.
Like any legal document, a Lady Bird Deed is best pursued with the help and expertise of an experienced Florida real estate and estate planning attorney. Farshchian Law, P.A. has experienced Florida attorneys that are familiar with this versatile legal strategy and know how to draft the deed effectively. Our attorneys can also advise on whether a Lady Bird Deed is the best option for your needs and circumstances. Please call us at (800) 604-1871 or email us at Info@JFRealEstateLaw.com for a free consultation on Lady Bird Deeds and our other estate planning and real estate services. We offer estate planning, real estate, and probate services throughout the State of Florida.