Lady Bird deed often a wise option

Q: I am hearing more about Lady Bird deeds. What are they, and what are their pros and cons? — Arnie

A: Deeds that create an enhanced life estate, which are often called “Lady Bird deeds,” are becoming increasingly popular estate planning tools.

When a life estate is created, a property owner, called the “grantor,” deeds the property to themselves or another person, called the “life tenant,” for the rest of their life, while also designating who gets the property when the life tenant passes away. This person is called the “remainderman.”

For example, if Dad owns an apartment and deeds it to himself as the life tenant, with the remainder going to his daughter, Dad will own the property while he is alive, while his daughter will own the future rights to the apartment. When Dad passes away, the apartment will automatically transfer to his daughter without the need for a will or a probate administration.

While it is a good idea to avoid the expense and hassle of probate, because both Dad and his daughter are vested in the apartment, they will both have to agree to sell it or even take out a mortgage on it. Since Dad may not want to have to ask his daughter for permission, this arrangement might not work for Dad.

In the 1980s, a South Florida attorney came up with a solution and published an article using former first lady Claudia “Lady Bird” Johnson as the property owner. His idea was to create an “enhanced” life estate that allowed the life tenant to transfer, mortgage or remove the remainderman from their property without the remainderman’s permission. This allowed probate to be avoided while keeping the property owner in control while alive. It was a good solution and rapidly spread from Florida to Texas, Michigan, Vermont and West Virginia.

The primary advantage is that Lady Bird deeds offer greater flexibility than standard life estate deeds. With a standard life estate, you cannot change your mind and sell or mortgage the property without the consent of the person who will, in effect, inherit the property. With a Lady Bird deed, you retain the right to do so.

While there are few drawbacks to Lady Bird deeds, standard life estate deeds can still be useful. For example, when dealing with a parent with declining mental acuity, requiring the consent of a loved one to sell or mortgage their home can be a valuable protection. Signing a deed to your property should always be taken seriously, as any misstep can have serious consequences.

When trying to plan your estate, it is important to carefully consider all of your options and consult with a qualified attorney to ensure that you are making the best decision for your unique situation.