What in the world is a Lady Bird Deed (Transfer on Death Deed)?
Lady Bird deeds are named after the one and only Lady Bird Johnson (President Lyndon Johnson’s wife).
Some say that the name came from the fact that President Johnson used such an estate-planning tool to transfer property to Lady Bird after his death. Others disagree, saying that President Johnson never used such a nifty trick. Instead, critics claim the name stuck after a lawyer in Florida who created the deed back in the 1980s used the names of the Johnsons in an example for how the deed worked and the names stuck.
How do they work?
So now that we know why they are called Lady Bird deeds, what do they actually do? Lady Bird deeds are also known as enhanced life estate deeds, or here in Minnesota, “Transfer on Death” deeds though that likely doesn’t help explain things. Lady Bird deeds work by allowing a person who intends to give away real estate to name a beneficiary. The person making the gift (the grantor) is able to retain the exclusive control of the property during his or her lifetime, meaning he or she can sell the property or even change his or her mind and leave it to someone else entirely.
What are the benefits?
The biggest benefit of a Lady Bird Deed is that it allows you to avoid probate. That’s because the deed includes a named beneficiary to whom the property passes automatically, never needing to work its way through the probate system.
Lady Bird Deeds are also useful because they offer far more flexibility than standard life estate deeds. With these normal life estate deeds you would have more restrictions on your rights while alive. For example, you would not be allowed to sell or mortgage the property or name new beneficiaries and you might also be liable to the beneficiary if you did anything to substantially lower the value of the property.
Another benefit of a Lady Bird Deed is that they can help shield a home from the Medicaid estate recovery program. This means that if you receive Medicaid benefits during your life, the state can make a claim for repayment after your death from the assets you leave behind. In many states, these claims are only made on items that pass through the probate process. If you live in such a place and the state only seeks reimbursement from probate assets, then real estate with a Lady Bird Deed will be immune given that it passes outside the probate system.
Any disadvantages?
One possible disadvantage to using a Lady Bird deed is that those looking to transfer property to multiple heirs could encounter disputes given that the heirs would co-own the property. An easier solution might be to create a trust that places one person in charge of managing the property and then distributing the proceeds to the beneficiaries. Additionally, if you have multiple properties it can become time-consuming to frequently amend beneficiary designations. Consolidating them into one trust might make for a smoother process.
Though it may be confusing, creating an effective estate plan does not have to be an overly complicated process. An experienced Minnesota estate-planning lawyer can help walk you through the process of establishing or updating a will or trust. For more information on estate planning in Minnesota, along with a variety of other topics, contact Joseph M. Flanders of Flanders Law Firm at (612) 424-0398.
See Our Related Blog Posts:
Minnesota Estate Planning: What A Will Won’t Do
The Importance Of A Will In Minnesota
Lady Bird deed is a good alternative to the more popular estate plans but of course, you will still have to consult a lawyer to be able to take advantage of this option without a problem. The world ‘Lady Bird’ may not create a strong impression but if you will take a closer look into this deed, you will absolutley appreciate its importance.
Thank you for the comment. We agree that Lady Bird Deeds or “Transfer of Death Deeds” are powerful estate planning tools that should be considered by many people while preparing their Wills and/or Trusts.
Question on this type of deed with step families, can the surviving step spouse who owns the property as a joint tenet, change the joint in common beneficiaries and disinherit the biological child of the spouse owner who passed away? What protects that child from being disinherited by their step parent?