Lady Bird Deeds
By: Jonathan Innes, Esq., Barry L. Miller, P.A. Offices Orlando
Lady Bird Deeds, like a life estate deed, is a deed that allows an individual to transfer real property that does not become effective until their death, but has some added benefits above and beyond a standard life estate deed.
Lady Bird deeds and life estate deeds are typically used to avoid probate. When a person passes away, probate may be necessary to transfer real estate unless the deed has a provision within it about what happens upon death of the grantee. Some deeds are drafted with “rights of survivorship” or “tenants by the entirety” for married couples to avoid the necessity of probate. A life estate deed also transfers ownership of real property when a person passes. A concern with each of these deeding methods is that the co-owners will need to unanimously agree to a sale, mortgage, or transfer 100% of the property to a third party.
This deed derived its name from Lady Bird Johnson, the former first lady and wife of President Lyndon Bain Johnson, as this was how he left his enormous real estate portfolio to his wife. A Lady Bird deed (also known as enhanced life estate deed) allows the property owner to retain all rights toward the real property during his or her lifetime, including the right to sell or mortgage the property or even change the person who will receive the property after he or she passes. The remaindermen’s consent will not be necessary to make these changes of ownership in the property. When the owner passes, the remainder beneficiaries will simply file your death certificate in the public records, giving proof that the property has officially been transferred to the remaindermen, all without the need for probate.
The Lady Bird deed also allows the owner to avoid triggering the Federal gift tax on the transfer during your lifetime. Many people forget that the Federal gift tax applies to any and all gifts in excess of $14,000.00 from a U.S. person to any other person, except for their spouse, during a calendar year. As most houses are in excess of $14,000.00, simple estate planning of transferring ownership of real property during one’s life could result in huge tax consequences. Further, the Florida Department of Revenue typically only assesses minimum documentary stamp taxes for transfers if the person who transfers the property is the same person that retains the life interest.
Please be advised that special consideration needs to be given when drafting Lady Bird deeds as there are concerns when one is not including all children and if improper language is used. If the Lady Bird deed is not drafted correctly, title insurance companies may not insure it and probate may become necessary to clean the mess. As such, it is always advisable to have an attorney prepare or review it to ensure the form is done correctly.
If you need legal advice concerning Lady Bird Deeds or have questions regarding the applicable Florida Law, please call us at 407-423-1700 or vist www.BarryMillerLaw.com to schedule a free consultation.