A Lady Bird deed is a deed that allows a real property owner to transfer ownership of the property to another person or entity while continuing to use and control the property.
In some states a Lady Bird deed may be used as an estate planning tool, allowing the owner to make a lifetime gift of the property; avoid federal gift taxes (because it is an incomplete gift and is not final); avoid probate; qualify for Medicaid benefits; and continue to live in their private home after transferring ownership (title) of it to another person or entity.
A Lady Bird deed may also be referred to as an enhanced life estate deed, as it effectively gives the owner a life estate interest in the property while transferring ownership (title) to another person or entity.
Laws vary from state to state, but a Lady Bird deed may also allow the owner to continue to have complete control of the property, without input from the grantee under the Lady Bird deed. This may include the owner’s right to change their mind and sell or transfer the property to another person or entity, or to make changes to the property.
In Texas, a Lady Bird deed, also known as an enhanced life estate deed, is recognized as a valid legal tool for estate planning. This type of deed allows the property owner to retain control over the property during their lifetime, including the right to sell or mortgage the property, while designating a beneficiary to automatically receive the property upon the owner's death without the need for probate. The owner's interest in the property is called a life estate, and the beneficiary's interest is a remainder interest. One of the key benefits of a Lady Bird deed in Texas is that it can help the property owner qualify for Medicaid by not counting the property as an asset, since the transfer is not considered complete until the owner's death. Additionally, because the transfer is incomplete during the owner's lifetime, it typically does not trigger federal gift taxes. It's important to note that the use of a Lady Bird deed must be carefully considered in the context of the owner's overall estate plan and potential tax implications.
