Is a lady bird deed right for you?
If you’re like many people, your home will be the largest asset you own in your lifetime. So when you’re working on your estate plan, it’s important to ensure that you take your home into consideration. A lady bird deed is one way to do this.
Lady bird deeds can offer you greater flexibility and control over your property.
But what exactly are they, and what are the pros and cons? Lady bird deeds, which are also sometimes called “transfer on death deeds” or “enhanced life estate deeds,” are a way to transfer your home or other real estate upon your death to a designated beneficiary – while keeping rights to the property during your life.
This deed might have got its nickname when President Lyndon B. Johnson used it to transfer property to his wife, Claudia Alta “Lady Bird” Johnson.
Potential benefits of a lady bird deed
Control: One of the biggest benefits of this deed is that you retain full control of your property during your lifetime, including the right to sell or transfer it.
Avoiding probate court: The probate process can be expensive and mentally draining, especially after the loss of a loved one. Through a lady bird deed your home can bypass this process entirely, saving your loved ones significant cost.
Tax advantages: Who doesn’t love saving money, especially when it comes to taxes? This deed can offer potential advantages in several areas, such as the gift tax and capital gains taxes.
Medicaid planning: It may help you qualify for Medicaid benefits by reducing the assets that are considered for eligibility. In addition, through the Michigan Estate Recovery Law, the state can claim reimbursement from your estate for Medicaid benefits paid during your lifetime. By transferring your home to a beneficiary, your home cannot be used for this reimbursement.
Other benefits: For certain situations, a lady bird deed can be an ideal estate planning solution. For example, if your home is the only asset you own, you may be able to use a lady bird deed to get a similar level of protection as a trust, for less cost. Additionally, this type of deed can give your beneficiaries some protection from creditors.
Potential disadvantages
While a lady bird deed has many desirable benefits, it’s not a one-size-fits-all estate planning solution:
Multiple beneficiaries: Thinking about leaving your property to more than one beneficiary? Here is where this deed is far less flexible.
Multiple properties or assets: If you own more than one home or have considerable net worth in other assets, this deed might not be strong enough to help you avoid probate.
Not available in all states: Michigan is one of the handful of states that offers this. So if you own property in a different state that doesn’t allow for this type of estate planning document, it won’t cover that property.
It’s also important to note that in order to be the most effective, a lady bird deed needs to be properly drafted. An estate planning attorney can help you determine if this type of legal document is a good strategy for your situation, and then work with you to develop it.
Fortunately, even if this type of deed isn’t right for you, there are a number of other estate planning strategies that can help to provide similar benefits.
Call (810) 207-6670 or complete our online form to request a free phone consultation.
Buzz Suuppi
Buzz started The Plan Firm for his family, which is everything to him. Every member of his team is committed to providing effective estate planning and related solutions for families in St. Clair County, Michigan.