Florida Lady Bird Deed: Advantages and Disadvantages

What Is a Lady Bird Deed?

A Florida lady bird deed is a legal instrument that transfers real property to beneficiaries automatically upon the grantor’s death, thereby bypassing probate. Unlike with a standard life estate, the grantor retains the right to sell, mortgage, or cancel the deed at any time without the beneficiary’s consent.

In Florida, this deed is primarily used to avoid probate, preserve Medicaid eligibility, and maintain full control over the property.

Lady Bird Deed vs. Other Tools

The following table compares the lady bird deed against other common estate planning instruments in Florida regarding cost, control, and creditor protection.

How a Lady Bird Deed Works

A lady bird deed splits legal ownership of the property into two separate legal interests:

1. The Life Estate (Present Interest)

The current owner (the “Grantor”) grants themselves a life estate. This gives them the exclusive right to possess, use, and live in the property for the remainder of their lifetime. As the life tenant, the Grantor remains responsible for all property taxes, insurance, and maintenance costs.

2. The Remainder Interest (Future Interest)

The deed names a beneficiary (the “Remainderman”) who receives a remainder interest. This is a future ownership right that only vests (becomes active) the moment the Grantor dies. Under Florida law, this transfer happens automatically by “operation of law,” meaning the property never becomes part of the probate estate.

Enhanced Powers

What makes this deed “Enhanced” is the specific reservation of powers. In a traditional Life Estate deed, the Life Tenant cannot sell or mortgage the property without the signature and consent of the Remainderman.

In a Lady Bird Deed, the deed explicitly reserves the unilateral power to:

• Sell or gift the property.
• Mortgage or refinance the property.
• Revoke or amend the deed entirely.

If the Grantor exercises these powers (e.g., sells the home to a third party), the Remainder Interest is extinguished, and the beneficiary receives nothing. This retained control is why the IRS considers the transfer an “incomplete gift” for tax purposes.

Benefits of Lady Bird Deeds

Beyond simply avoiding probate, the lady bird deed offers specific statutory advantages under Florida’s Homestead and Medicaid laws that are not available with standard life estate deeds.

1. Avoidance of Probate

The primary function of the deed is to bypass the Florida probate court system. Upon the death of the Grantor, the property transfers instantly to the remainderman (beneficiary). The beneficiary typically only needs to record the Grantor’s death certificate with the county to clear the title. This saves the estate the attorney fees and months of delay associated with formal probate administration.

2. Medicaid Eligibility (The 5-Year Lookback)

For seniors planning for long-term care, the lady bird deed is a preferred tool because it is not considered a transfer of assets for Medicaid purposes.

Under standard Medicaid rules, transferring a home to a child is considered a gift, which triggers a penalty period if done within five years of applying for benefits (the “Lookback Period”). However, because the lady bird deed allows the Grantor to revoke the deed at any time, the Department of Children and Families (DCF) considers the transfer “incomplete.” Therefore, the property value is not counted against the applicant, and the five-year lookback period does not apply.

3. Preservation of Homestead Exemption

Executing a Lady Bird Deed does not constitute a “change of ownership” for property tax purposes.

• Save Our Homes Cap: The Grantor’s “Save Our Homes” assessment cap remains intact.
• Tax Exemption: The Grantor continues to receive their standard Homestead Tax Exemption.
• Creditor Protection: The property remains protected from the Grantor’s creditors under Article X, Section 4 of the Florida Constitution during the Grantor’s lifetime.

4. Federal Tax Advantages

Because the transfer is not final until death, it provides significant tax benefits compared to gifting the home outright while alive:

• No Gift Tax: The transfer is not a completed gift, so no federal gift tax return (Form 709) is required.
• Step-Up in Basis: Upon the Grantor’s death, the beneficiary receives a “step-up” in the property’s cost basis to its fair market value at the time of death. This can eliminate significant capital gains taxes if the beneficiary decides to sell the property immediately.

Disadvantages of Lady Bird Deeds

While the Florida lady bird deed is a powerful tool, it is not a perfect solution for every estate. It carries specific risks related to insurability, financing, and Florida’s rigid constitutional restrictions on devise.

1. Title Insurance Issues

The most practical disadvantage of a lady bird deed is not legal, but commercial. Title insurance underwriters in Florida are risk-averse. Even though the deed legally reserves the right for the grantor to sell the property without the beneficiary’s consent, many title companies will refuse to insure the transaction unless the beneficiary (remainderman) also signs the new deed.

If the beneficiary refuses to sign—or if they are incapacitated, a minor, or have uncooperative spouses—the grantor may find themselves unable to sell or refinance their own home without filing a “quiet title” lawsuit.

2. Mortgage & Refinancing Complications

Banks are often hesitant to issue mortgages on properties with Lady Bird Deeds.

• Refinancing: If the grantor wants to refinance the home, the lender generally requires that the lady bird deed be revoked first, returning the title to fee simple status.
• Due-on-Sale Clauses: While federal law (Garn-St. Germain Act) typically prevents lenders from calling a loan due upon transfer to a relative, specific bank policies can vary, creating administrative headaches.

3. No Creditor Protection During Lifetime

A lady bird deed provides no asset protection for the grantor during their lifetime. Because the grantor retains full control and ownership, the property remains available to their creditors.

• If the Grantor is sued or files for bankruptcy, the property is treated as if the deed does not exist.
• (Note: The property may still be protected by the Florida homestead exemption, but the lady bird deed itself adds no extra layer of shielding).

4. Constitutional Restrictions

Florida’s Constitution (Article X, Section 4) restricts who you can leave your primary residence to.

You cannot devise (by will or deed) your homestead to anyone else if you are survived by a spouse or a minor child.

A lady dird deed counts as a “devise.” If you have a minor child and you attempt to use a lady bird deed to leave the home to an adult child or a trust, the deed is void. The property will instead pass according to Florida intestacy statutes, creating a life estate for the spouse and a vested remainder for the children.

Requirements of Lady Bird Deeds

For a Florida lady bird deed to be valid, it must strictly adhere to the Florida Statutes regarding the conveyance of real estate (Fla. Stat. § 689.01). A deed that is improperly executed may be accepted by the clerk’s office for recording but later declared void by a judge or title underwriter when you try to sell the property.

1. It must be signed with correct formalities.

To execute the deed legally, you must meet these three requirements at the time of signing:

• Grantor’s Signature: The current owner(s) must sign the deed.
• Two Witnesses: The grantor’s signature must be witnessed by two distinct individuals. These witnesses must be “disinterested,” meaning they are not named in the deed and have no financial interest in the property.
• Notarization: The grantor must acknowledge their signature before a Notary Public.

2. It must include a correct legal description.

You cannot simply use the property’s street address (e.g., “123 Palm Tree Lane”). The deed must contain the formal legal description of the property, exactly as it appears on the current vesting deed.

• Example: “Lot 4, Block B, of SUNSET ESTATES, according to the Plat thereof, as recorded in Plat Book 12, Page 45, of the Public Records of Miami-Dade County, Florida.”

3. You must pay the correct recording costs.

Once signed, the deed is not fully effective against third-party creditors until it is recorded in the Official Records of the county where the property is located.

• Recording Fee: The Clerk of Court typically charges approximately $10.00 for the first page and $8.50 for each additional page.
• Documentary Stamp Tax: Because a lady bird deed is a gift and no money changes hands, the documentary stamp tax is the statutory minimum: $0.70 (70 cents). You do not pay taxes based on the property’s market value.

Frequently Asked Questions