When it comes to estate planning, there are a number of things that you can do to make sure that your loved ones are taken care of after you’re gone. One popular option is the lady bird deed. This type of deed allows you to transfer property ownership while still retaining some control over it. However, there are also some limitations to this type of deed. In this blog post, we will discuss the advantages and disadvantages of the lady bird deed so that you can decide if it’s right for you!
How A Lady Bird Deed Works
The Lady Bird deed, also known as an enhanced life estate deed, is a type of deed that allows you to transfer ownership of your property while still retaining some control over it. The way it works is that you, as the grantor, name yourself as both the grantee and the donee in the deed.
This means that you are still the owner of the property while you are alive, but you have given someone else the power of appointment over it. The default beneficiary in a Lady Bird deed is typically the grantee’s spouse, but it can be anyone that you choose. This type of deed is often used by married couples as a way to protect their assets from creditors.
What Are the Advantages of a Lady Bird Deed?
There are a number of advantages to using a Lady Bird deed. First, it allows you to retain control over your property while you are alive. Additionally, the Lady Bird deed can provide protection from creditors.
This is because the default beneficiary in a Lady Bird deed does not receive any ownership rights until after the donee’s death. This means that your property is protected during your lifetime from claims by creditors of the beneficiary. Finally, execution of a Lady Bird deed is not considered a gift for federal gift tax purposes.
What Are the Disadvantages of a Lady Bird Deed?
There are several benefits to using this deed. However, there are also some disadvantages that you should be aware of if you are getting ready to prepare a lady bird deed. First, it is important to note that this type of deed can only be used for real property, such as a house or land. Additionally, the Lady Bird deed can only be used in certain states.
Currently, the states that allow for this type of deed are Alabama, Florida, Kentucky, Michigan, Mississippi, Missouri, Montana, Nebraska, New Jersey, North Carolina, Ohio, Oklahoma, Oregon, South Dakota, Tennessee, Texas, Virginia, and Wisconsin. Finally, it is important to consult with an attorney before executing a Lady Bird deed, as there are a number of legal requirements that must be met in order for it to be valid.
What If Nursing Home Care Is Needed?
If you find yourself in a situation where you require nursing home care, a Lady Bird deed can still be of benefit to you. This is because Medicaid considers the property protected by a Lady Bird deed to be an exempt asset. This means that it will not count towards your eligibility for Medicaid benefits. Additionally, the property will still be inheritable by your beneficiaries after your death.
However, it is important to note that your income will still be used to pay for your care costs while you are in the nursing home. This means that your beneficiaries will need to find another way to cover the expenses associated with maintaining the property.
Medical planning is an important part of estate planning. This is because you need to make sure that your loved ones are taken care of if you become sick or injured. There are a number of ways to do this, but one option is to create a medical power of attorney.
This can be important if you become sick or injured and are unable to communicate your wishes to your loved ones.
Additionally, medical power of attorney can help to ensure that your loved ones are able to make the best possible decisions for your care. It is important to consult with an attorney before creating a medical power of attorney, as there are a number of legal requirements that must be met in order for it to be valid.
Limitations Of Lady Bird Deeds
In some cases, such as when an owner is expected to die with a large unpaid lien on the property, using a Lady Bird deed is not the best option. It may be inadvisable where an owner wishes to leave the property to multiple (more than two or three) default beneficiaries, particularly if they do not get along. The rationale for this is that after the owner’s death, the default beneficiaries will have to work together to sell or dispose of the property, and conflicts might lead to a partition case.
Another potential drawback of using a Lady Bird deed is that it sets up a less flexible arrangement than a trust. If the Lady Bird deed names specific individuals as beneficiaries, those individuals will inherit the property regardless of any changes in circumstance that may occur over time. For example, if one of the beneficiaries dies or becomes incapacitated, the property will still pass to that beneficiary’s heirs according to the terms of the deed. In contrast, a trust can be structured to provide for changing circumstances and can be amended as needed.
Despite its limitations, a Lady Bird deed can be a useful tool for transferring property to loved ones while retaining the right to use and enjoy the property during one’s lifetime. When used in the right situation, it can provide peace of mind knowing that the property will go to the intended beneficiaries without having to go through probate.
A Lady Bird deed can be a useful tool for transferring property to loved ones while retaining the right to use and enjoy the property during one’s lifetime. However, it is important to consult with an attorney before executing a Lady Bird deed, as there are a number of legal requirements that must be met in order for it to be valid.