A lady bird deed in Florida is a legal form that transfers property upon death inexpensively and without probate. A lady bird deed allows the current property owner to use and control the property during the owner’s lifetime, while the property automatically transfers upon death to designated beneficiaries.
In Florida, a lady bird deed is the easiest way to avoid probate for your home. It also protects the property from Medicaid.
What Is a Florida Lady Bird Deed?
A lady bird deed is a special type of deed in Florida that transfers property upon death. It includes a grantor, an enhanced life estate, and a remainder beneficiary.
Grantor
The grantor is the current owner of the property. This person is splitting their fee simple legal interest in the property into an enhanced life estate and a remainder interest.
Enhanced Life Estate
An enhanced life estate is a deed provision that allows a property owner to keep control over the property during their lifetime and transfer the property upon death to a beneficiary.
Remainder Beneficiary
The remainder beneficiary is the person or group of people who inherit ownership of the property upon the death of the life tenant. The legal interest of the remainder beneficiary vests when the life tenant dies. The remainder beneficiary has no ownership interest in the property during the lifetime of the life tenant.
Other Requirements
All lady bird deeds must include a formal legal description. The legal description is the property’s formal identification in the public record.
A homestead provision is required to keep homestead exemption rights in the property. The grantor retains homestead rights after executing a lady bird deed for as long as the grantor lives in the property.
We prepare deeds for clients throughout Florida.
We charge a flat fee for a consultation and preparation of your lady bird deed. Our attorneys can do everything remotely by phone or Zoom.
Advantages of a Lady Bird Deed
A Florida lady bird deed allows a property owner to transfer property upon death while avoiding probate. The deed is inexpensive, revocable, and simple compared to a trust. The advantages of lady bird deed include:
Avoids probate
A lady bird deed allows a property to transfer on death to named beneficiaries without probate.
Inexpensive
A lady bird deed can be obtained for a relatively low cost compared to a more complicated and expensive living trust. The grantor will avoid documentary stamp taxes if the grantor is the holder of the enhanced life estate.
Simple to set up
A lady bird deed does one thing but does it well: it transfers a person’s real property upon the death of the property owner.
Can be revoked
The property owner is free to change their mind at any point during their lifetime. The property owner can enter into a new deed that gives the remainder interest to someone else or cancels the lady bird deed entirely.
Protects against Medicaid
A lady bird deed can be a useful tool in Florida for people who qualify for Medicaid and who are concerned that the government will be able to take non-homestead properties after their death. A ladybird deed transfers property after death outside probate, so the property is not part of the decedent’s probate estate. In this way, non-homestead properties are kept out of the probate estate and are protected from collection by medical claims or any other creditors after the property owner’s death.
Doesn’t trigger a gift tax
Transferring property with a lady bird deed does not trigger a gift tax. The transfer is not a completed gift during the lifetime of the property owner.
In addition, a lady bird deed lets your heirs take advantage of a step-up in basis. A stepped-up basis means that if the property is eventually sold by the beneficiary, the beneficiary will pay income tax only on the appreciation in value from the date when the original property owner died.
Disadvantages of a Lady Bird Deed in Florida
The disadvantages to lady bird deeds in Florida include:
- Lack of Asset Protection. A creditor of the current owner may place a lien on the property, other than a homestead, conveyed by a lady bird deed.
- Constitutional Restrictions. A person cannot use a lady bird deed to disinherit a spouse or minor child.
- Unexpected Deaths. If the holder of the remainder interest dies before the life tenant dies, it may become unclear as to what happens to the property when the original life tenant later dies.
- Changes to the Estate Plan. It will require extra work for the original owner to change their plan should they later decide not to leave the property to the named remainderman.
Despite the disadvantages, people often use lady bird deeds in Florida as a simple, inexpensive way to transfer their home upon death without probate.
Steps to Getting a Lady Bird Deed
To create a lady bird deed in Florida, the property owner must (1) obtain the legal description, (2) create the deed with an enhanced life estate, (3) have two witnesses, and (4) record the deed in the county records. The person receiving the property after death does not need to sign the deed.
Hypothetical Example
Our client is an un-remarried widow who owns two properties in Florida. She lives in one, and the other she has been renting out for twenty years.
She is in her 80s, and our client’s children are concerned about what will happen to her properties when she dies. They don’t want to go through probate. But, they don’t want to do anything now that would hurt them from a tax perspective.
We would prepare a lady bird deed for both properties for our client. We would include a homestead provision for the property where our client lives. After our client approves and signs the deeds, we would record them in the counties where the properties are located.
After our client passes away, both properties would transfer automatically upon death to her children. The children will not have to go through any court proceedings for either property. And they will get a step up in basis on both properties, which will be a substantial tax advantage.
Lady Bird Deed vs. Life Estate Deed
A lady bird deed is not the same thing as a life estate deed. Unlike a life estate deed, a lady bird deed provides a property owner full control over the property during the owner’s lifetime.
A life estate deed splits a property’s fee simple interest into a life estate and the remainder. The transferor retains the life estate in the property. The transferee receives the remainder interest in the property, which comprises all ownership interests remaining other than the retained life estate.
If the life estate holder wants to sell the property, then both the life estate holder and the remainderman must agree to the sale. The grantor of the deed retains the right to live in the property during their lifetime, but they cannot sell or mortgage the real estate during their life without the remainderman’s consent.
On the other hand, the lady bird deed has the features of a life estate deed, but the life estate interest is enhanced by the ability of the life estate holder to revoke the deed or sell and mortgage the property. Unlike with a traditional life estate deed, a lady bird deed gives the enhanced life estate owner complete control over the property while they are living. The owner can freely sell, transfer, or mortgage the property without the beneficiary’s consent.
Lady Bird Deed vs. Quitclaim Deed
Unlike a quitclaim deed, a lady bird deed does not transfer the owner’s entire property interest to the grantee. A grantor of a lady bird deed retains part of the ownership as an enhanced life estate in the property during their lifetime. In other words, a lady bird deed functions as a quitclaim deed that only becomes effective after death under Florida law.
Civil Judgments
There are different considerations for lady bird deeds if a money judgment has been issued against either the current owner or the designated remainder beneficiaries.
Judgment Against Current Owner
A lady bird deed does not protect an owner’s real property from creditors, other than a homestead, if there is a recorded civil judgment against the owner. A judgment becomes an automatic lien on all real property owned by the judgment debtor in any county in which the judgment is recorded, with the exception of homestead property.
A judgment lien would automatically attach to any non-homestead property that the debtor has conveyed in a lady bird deed. The judgment lienholder could foreclose the lien on the property.
Judgment Against the Beneficiary
A civil judgment against a named remainderman of a lady bird deed does not affect the owner’s interest in the property during the owner’s lifetime. This is true because the remainderman’s interest in the property does not vest until the owner’s death. Therefore, there is no legal interest to which the judgment can attach as long as the owner lives. Even if there is a judgment against a remainderman of a lady bird deed, the current owner retains full control over the property and is not affected by the judgment.
Tax liens are different. An IRS lien against a remainderman attaches to the property once the remainderman is named on the lady bird deed.
Title Insurance
Most major title insurance companies fully understand lady bird deeds and are not concerned about insuring the title of a property subject to a lady bird deed. Title companies should not require the signature or consent of the people listed as remaindermen (designated beneficiaries) when the enhanced life estate owner sells the property because the beneficiaries have no vested property interest.
Some smaller or less experienced title insurance companies may not understand a lady bird deed, and these companies may require the remaindermen to sign a release. Even worse, the companies may require any judgment holders against the remaindermen to release any claim of lien against the properties. These requirements stem from a lack of understanding about how lady bird deeds work.
Frequently Asked Questions
How much does a lady bird deed cost?
A lady bird costs $400. It included preparation of the deed and a consultation with an attorney. Recording the deed costs an additional $30 plus county fees.
Is a lady bird deed a good idea?
In Florida, a lady bird deed is a simple way to have property transfer to designated beneficiaries without the expense of probate. Using a lady bird deed may not be a good idea if there are civil judgments already entered against designated beneficiaries.
Is a lady bird deed better than a living trust?
A revocable living trust may not be required when the only property to be transferred via the living trust is a homestead. A living trust is the better estate planning option for people with significant assets other than their house.
Is a lady bird deed legal in Florida?
Florida is one of the few states where a lady bird deed is legal. The states that offer lady bird deeds include: Florida, Michigan, Texas, Vermont, and West Virginia.
Does a lady bird deed have to be recorded?
A lady bird deed must be recorded to be effective. Once the property owner executes the lady bird deed, the deed should be recorded in order to document the conveyance as part of the property’s legal chain of title. Recording the lady bird deed should not involve significant documentary stamp taxes, even if the property is mortgaged.
How do you change the beneficiaries on a lady bird deed?
A property owner can change the beneficiaries under a lady bird deed even after the original lady bird deed is recorded. The owner must execute and record a second lady bird deed that names the new person or people whom the owner chooses to inherit the property.
What do you do with a lady bird deed after the owner dies?
After the death of the life estate holder, the lady bird deed automatically transfers ownership of the property to the remainder beneficiaries. The remainder beneficiaries should record a copy of the death certificate in the county where the property is located. Then, the beneficiaries could contact the property appraiser so that the public records are updated with the names of the new owners.
About the Author
Gideon Alper is an attorney who specializes in asset protection planning. He graduated with honors from Emory University Law School and has been practicing law for almost 15 years.
Gideon and the Alper Law firm have advised thousands of clients about how to protect their assets from creditors.
