What is a Lady Bird Deed?
A Florida lady bird deed is a special kind of property deed that allows a property owner to make a transfer of real estate that essentially becomes effective upon the owner’s death without having to deal with probate.
In a Florida lady bird deed, a person retains an enhanced life estate in the property while transferring the remainder interest to someone else. In other words, the current owner has the right to stay in the property, while the recipient will own the property upon the owner’s death.
A lady bird deed therefore has two roles:
- A grantor—the current owner of the property and the person who will live in and control the property during their lifetime.
- A grantee—the person who will inherit the property upon the grantor’s death. This person is called the remainderman.
With a Florida lady bird deed, the grantor retains an enhanced life estate, not just a regular life estate.
Normally property is owned as fee simple, which means the entire ownership and control of the property is in the name of the current property owner.
When someone is given a life estate, that fee simple interest splits into two: (1) the life estate and (2) the remainder. One person will own the life estate and the other person will own the remainder, or what is left.
The owner of the life estate owns the property during his life. The owner of the remainder (called a remainderman) owns the property upon the death of the life estate holder.
You cannot have a life estate without a remainder interest.
If, during the lifetime of the life estate holder, the life estate holder wants to sell the property, then both the life estate holder and the remainderman have to agree.
In other words, the grantor would only retain the right to live in the property during their lifetime, but could not sell or transfer the real estate without the remainderman’s consent.
Any deed can take a fee simple interest and split it into a life estate and a remainder interest. This kind of deed would not be a lady bird deed.
Enhanced Life Estate Deed in Florida
A lady bird deed, also called an enhanced life estate deed, is when property ownership is split into an enhanced life estate and a remainder interest.
This enhanced life estate is the key feature that allows a lady bird deed in Florida to work. Only states that allow an enhanced life estate, therefore, can have a lady bird deed.
In fact, a lady bird deed is often just called an enhanced life estate deed.
What’s the difference between a regular life estate and an enhanced life estate in Florida?
Remember that with a regular life estate, the life estate holder must get the remainderman’s consent to sell, transfer, or mortgage the property.
But with an enhanced life estate, the life estate holder can do that on his own. No need to get persmission or consent from the remainderman.
In other words, the enhanced life estate holder has full and complete control over the property during his life. It’s as if the life estate holder never gave up any of the property in the first place!
In practical terms, this allows a property owner to “deed” property to someone else, but retain full control during his life. The maker of the lady bird deed can therefore later on decide to sell, mortgage, or transfer the property without consequence, leaving the remainderman with nothing.
But if the life estate holder merely keeps the property, then the remainderman will have full control over the property upon the death of the life estate holder.
A lady bird deed avoids probate. But why is that helpful?
A transfer-on-death deed is not allowed under Florida law. However, lady bird deeds are allowed, and these special deeds essentially provide the same effect as a transfer-on-death deed by transferring the remainder interest upon death outside the probate process.
Probate is process by which a court brings together all of a deceased person’s assets, determines if any creditors have claims against the deceased person or their assets, and then distributes whatever is left according to the person’s will.
It’s an expensive and time-consuming process.
A lady bird deed avoids all of that and instead allows the property to go into the hands of the property owner’s beneficiaries without having to deal with probate.
Disadvantage of a Lady Bird Deed in Florida
The several disadvantages to lady bird deeds in Florida include:
- Lack of Asset Protection. A creditor may be able to place a lien or levy on the remainder interest in the lady bird deed.
- Ineffectiveness against Florida 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 be legally unclear as to what happens to the property when the original life tenant then later dies.
- Changes to the Plan. It will require extra work for the original owner to change the plan should they later decide not to leave the property to the person designated as the remainderman.
A lady bird deed in Florida will retain its homestead character for the original property owner.
This means two things: first, the home will remain exempt from creditor attachment, and second, it will generally qualify for a homestead tax exemption.
Is a Lady Bird Deed Legal in Florida?
Florida is one of the few states where a lady bird deed is legal. The full list of states includes:
- West Virginia
Cost of Lady Bird Deed in Florida
The cost of a lady bird deed in Florida is generally inexpensive and can be done for a flat fee with an attorney.
In addition to the lady bird deed, you may wish for the attorney to review your overall estate planning to make sure you have all of the documents you need, including a will, health care directive, pre-need guardian designation, and living will.
Does Lady Bird Deed Have to be Recorded?
Once the property owner executes the lady bird deed, the deed should generally be recorded. Not recording the deed risks that the deed might be lost.
But what if you change your mind? A lady bird deed is revocable. In other words, the property owner can decide to deed the property back to himself, which effectively cancels out the lady bird deed.
Quitclaim Deed vs. Lady Bird Deed
The difference between a quitclaim deed and a lady bird deed in Florida is that a lady bird deed allows the current property owner to retain an enhanced life estate in the property during his life, while a quit claim deed typically transfers all title to the property to grantee, or the person receiving the property. However, one way to think about a lady bird deed is that it functions as a quit claim deed that becomes effective after death under Florida law.