Probate avoidance strategies are a dime a dozen. From creating an air-tight estate plan to leveraging intuitive trust benefits, learning how to avoid probate (and the complications associated with it) can feel like a daunting task.

In this guide, we’ll cover one of the most effective probate avoidance strategies in Florida: the Lady Bird Deed. Although the deed is admittedly complex, we will make sure to break down its components step-by-step so you can begin to even draft your own deed. Let’s begin.

The Enhanced Life Estate Deed, also commonly known as the Lady Bird Deed in Florida and other states, is a unique deed and estate planning tool that conveys real property ownership from one party (the Grantor) to another party or parties (the beneficiaries or remaindermen), upon the death of the grantor, without the need for probate.

Moreover, a ladybird deed has a major advantage over standard life estate deeds as the ownership of the property to be transferred is retained by the grantor. This unrestricted ownership allows for many different benefits to be realized, some of which will be examined further on in this article.

Planning for the future

If you and your family are strategic and looking to plan ahead, a ladybird deed is one of the most useful and cost-efficient ways when it comes to property transfer after death.

In the case that you already have a chosen beneficiary to take ownership of your property (one or more of your children, perhaps) you will be able to draft this deed to name them as a beneficiary.

But, because you still retain full ownership, there is flexibility to change your mind at any time.

Realizing Tax Advantages

Because this deed is not considered to be a gift, as the property is not transferred until your death, you will be able to set up your future beneficiaries without harming yourself with adverse tax consequences. Additionally, taxes that your designated beneficiaries will pay upon receipt of the property are reduced.

Health Issues

If you are facing health issues that are covered under Medicaid, you could run into issues by having the property be sold in order to pay for Medicaid expenses. Using a ladybird deed completely avoids this issue, as ownership of the property has not changed hands, and thus is not subject to any Medicaid regulations (including the five-year-lookback).

Simple & Cost-Effective

In situations where you might consider a living trust to realize certain benefits, a ladybird deed can be much more cost-effective and simple to draft. Rather than having to go through an estate lawyer, you can draft this deed yourself (as you will see below) or you can hire estate planning professionals for additional guidance.

Before we examine the drafting process for a ladybird deed, please note that we are not licensed attorneys, and do not purport to give legal advice regarding drafting this instrument. Each situation is different and may call for various changes.

There is no one-size-fits-all template with ladybird deeds, so ensure you take the information presented as merely basic guidelines.

Each state requires its own validity requirements such as correct wording, font size, and page layout, make sure to review Florida’s requirements in addition to the below points.

A ladybird deed must have the following:

1. A correct legal description of the property.
2. A statement of the consideration is provided if there is any.
3. The name of the grantor.
4. The name(s) of the beneficiary(ies) (if multiple owners are on title, a specification as to how the co-owners will hold title is required).
5. Page size and font requirements as per Florida regulations. (Arial - 14pt font, or Bookman Old style-14pt font)
6. Reservation of lifetime rights to sell or encumber the property. If the property to be transferred is the grantor’s homestead, then a section preserving the homestead exemption must be included.
7. Grantor's signature and notarized

Although there is no probate statute for a ladybird deed, you will have to get the document notarized and recorded within the county in which you reside.

Lady Bird deed sample, provided by the Palm Beach county clerk

No. While the recording of the deed is not a legal requirement, doing so creates a presumption that the deed was properly delivered; a requirement for a valid deed.

In the state of Florida, your county’s clerk of court will be able to record your ladybird deed.

The enhanced life estate deed is indeed revocable, meaning that the grantor may choose to deed the property back to themselves or another person.

Furthermore, the owner may choose to transfer their property to a third party, which would cancel out the ladybird deed and divest the remaindermen of their interest in the property as well.

However, at the time of death - just like a living trust, the deed becomes irrevocable.

The ladybird deed comes with some distinct advantages that are highly useful in many different situations. Here are some of the most common benefits.

Changing Beneficiaries Immediately

Because this type of life estate deed is enhanced, it allows for much more flexibility, as noted above. One point of flexibility is the ability of the grantor to change the beneficiaries of the deed at any time or even have the entire deed undone if they so desire.

Right to Sell

Given that the ownership of the property only transfers upon the death of the grantor–who is typically the owner–the owner may deal with the property as they wish without any encumbrances from the beneficiaries or other parties named in the ladybird deed.

Medicaid Eligibility

Finally, since the transfer of the property owned does not occur until the grantor’s passing, it is not considered to be any sort of gift that would hinder Medicaid or public assistance. Moreover, if the property in question is the homestead, it will not be considered to be a countable asset, and thus will not affect the grantor’s ability to receive Medicaid assistance.

Although there are many benefits to using a ladybird deed, there are some crucial disadvantages that need to be taken into account when deciding to create such an instrument. Below are some of the most well-known.

Passing of Remaindermen

If any of the remainder interests (remaindermen) predeceases the grantor, confusion may arise as to how the property will be distributed. Because of this, the deed will have to be revoked and re-drafted or there may be adverse consequences.

One of these consequences is that the deceased remainderman’s interest may end up going to their estate, which may complicate matters, or to the remaining joint remainderman. How this interest is distributed is based upon how the wills, ladybird deed, and other deeds related to the property were drafted.

Lady Bird Deeds and Loans

Some banks may be reluctant to give home loans on the ladybird deed. Given that banks may not understand the non-vested nature of the deed, confusion can result and cause issues if you are trying to use your property named in the deed for a loan.

Additionally, if there is a creditor’s lien on the property, it will stay attached even once the transfer has occurred, creating a cloud on the title.

Coordinating Your Estate Plan

Finally, it's important to note that a ladybird deed will supersede any will you have drafted.

For example: if property A is designated to be given to your Son, Mike, as per your will, but your ladybird deed states the property is to go to your daughter, Michelle, the property will transfer to her name upon your passing. Without a cohesive estate plan, a ladybird deed has the possibility for grave consequences.

The first interest, also known as the life estate, is typically the current owner of the property and the grantor of the deed. This life estate is a lifetime interest based upon the grantor’s lifetime, which means that the grantor (or another party) will hold a life interest in the property until their death.

Concurrent with the passing of the grantor, the person named as the remainder beneficiary or simply remainder, becomes the person with a real ownership interest in the property; they may use it as they like.

However, until the owner of the property passes, the future owner or beneficiary is a co-owner with the life tenant and therefore does not have ownership of the property. Because of this co-ownership, the grantor cannot deal with the property as they see fit; they require the co-owners approval.

This is one of the major advantages of the ladybird deed. It allows for complete, unrestricted, and total ownership of the property before the death of the grantor.

As the grantor, you retain the right to change the beneficiaries as you wish, sell the property, mortgage it, etc., without needing consent from any other parties–there are none.

In contrast to any sort of life estate deed, a Quitclaim Deed immediately transfers the fee simple interest from the grantor to the named grantee on the deed.

A ladybird deed only transfers full ownership of the property once the grantor has passed, while leaving future interest in the hands of the remaindermen.

The Importance of Professional Estate Planning

Bearing in mind the language requirements, complex estate consequences, and other factors, drafting a ladybird deed is no simple matter.

Rather than going through the hassle of painstaking research, or the expensive fees of a Florida attorney, ClearEsate offers advice and assistance at an affordable rate.

What are the income tax consequences on the sale of real property subject to a life estate?

One common income tax consequence on the sale of property subject to a life estate is what is known as a “step-up” basis. In essence, upon the passing of the life tenant of the property, the property will be adjusted to have a fair market value equal to the value of the property at the time of the owner’s death.

For tax purposes, this entails that if the remaindermen sell the property, they will only be taxed on the appreciation of the property from the time of death onward, thus saving possibly thousands in capital gains tax if the value of the property increased significantly during the owner’s lifetime.

How Much Does it Cost for a Lady Bird Deed in Florida?

While there is quite a range, to have a ladybird deed prepared by an attorney in the state of Florida will cost around $350 or less, plus recording fees. If you decide to use a template online, that will run you around $50-$100.

Does a Lady Bird Have to be Recorded?

Legally, the state of Florida does not require these deeds to be recorded. However, it is standard practice, and for good reason. In Florida, when a deed is recorded by the clerk of court, it is presumed to be delivered properly. This presumption is a requirement to have a valid deed. Without that validity, the deed could be challenged and massive consequences could result.