Lady Bird Deeds (also known as Enhanced Life Estate Deeds) have become increasingly popular in Florida. Some of the common reasons as to why include: avoiding the Florida probate process for real property, more control over the property is retained for the grantor, and/or for use for Medicaid Long Term Care planning.
A Lady Bird Deed, which is only recognized in Florida and a handful of other states, is used as a solution to the drawbacks that may come with a Traditional Life Estate. This is due to the Lady Bird Deeds “Enhanced” nature.
The main difference between a Traditional life estate and a Ladybird “Enhanced” Life Estate ultimately comes down to how much control is retained by the grantor as opposed to the listed successor (remainderman). To see the difference more clearly, we must dive into the two different types of Life Estates in this topic.
A traditional life estate is a limited ownership interest. Once the deed is recorded, not only is it irrevocable, but the still-living property owner must now obtain the remainderman’s consent to matters that will affect the property at issue. This is because two property interests are automatically created upon a “traditional life estate” being recorded in a deed. One for the owner and one for the remainderman.
During the owner’s life, he or she holds onto their possessory interests, the right to presently possess the property, which lasts until their death, at which point title would automatically transfer to the designated remainderman listed on the deed.
The remainderman’s interest in the property (remainder interest), will only vest at the time of the owner’s death. This essentially creates a co-ownership of the property, as the remainderman will now have a say as to what happens, or will happen, to the property he or she will receive. While the remainderman cannot possess the house until the death of the owner, the remainder man’s consent will now be needed to make certain changes affecting the property. This includes the ability to transfer or mortgage the property during life, and further, the property owner will not be able to appoint a new successor without the previous remainder man’s consent.
A Lady Bird deed avoids the traditional form by expressly reserving the life tenant’s right to transfer, lease, to complete renovations, mortgage, or otherwise use the property as he or she wishes, regardless of the remainderman’s future interest.
The Lady Bird Deed’s language has the same purpose in that it allows the property owner to create a transfer of that property that only takes effect upon their eventual passing. However, the owner would still retain all rights to the property during their lifetime, which includes the right to sell, rent, or improve the property, or change the person who will receive the property at his or her death. When the property owner passes, the property passes automatically to the transferee(s) listed on the deed.
Unlike a traditional life estate, the owner of an enhanced life estate has no risk of liability to the remainderman for any transfer or waste of the property. This also means that while the property owner is still living, they could change who the successor will ultimately be, without the need for the consent of any previously listed remainderman.
Not only will you avoid the headaches of probate, but as the property owner, you will retain more control as to what happens to that property during your lifetime than if you drafted a Traditional Life Estate. However, these documents can become complicated and may confuse many – so feel free to contact the Finity Law Firm if you are interested and have questions.