As a Florida estate planning attorney and a board certified real estate law attorney, sometimes people ask me to draft a deed to add someone as a co-owner with rights of survivorship or draft a Lady Bird Deed to avoid probate.
Changing real estate ownership should not be taken lightly. Previous articles discussed issues to consider when people want to add someone as a co-owner with rights of survivorship. You may read part one by clicking here and part two by clicking here. Below is a discussion about the use of a Lady Bird Deed in Florida.
Advantages of a Lady Bird Deed
A Lady Bird Deed, also called an Enhanced Life Estate Deed in Florida, is a relatively new type of deed first used in Florida in the early 1980s. Here are some of the advantages of using a Lady Bird Deed:
- Avoid probate. Similar to a standard life estate deed, the Lady Bird Deed names beneficiaries, called remaindermen, who will receive the property at your death.
- Keep complete control during your lifetime with no consent needed from the remainder beneficiaries. One of the major drawbacks of a standard life estate deed is that the remainder beneficiaries must consent if you want to sell or mortgage the property during your lifetime. This problem also exists when adding a co-owner to the property. Unlike the standard life estate deed, with a Lady Bird Deed beneficiaries do not have to consent to the sale or mortgage of the property.
- Avoid making a gift that might be subject federal gift taxes. If you use a standard life estate deed or a deed adding a co-owner to the property, you are gifting a portion of your property to that person. In 2013, you can only make gifts of up to $14,000 per person without reporting the gift on a federal gift tax return.
Issues with Lady Bird Deeds
If you are interested in using a Lady Bird Deed to avoid probate, seek guidance from an experienced real estate lawyer. Here are a few common mistakes to watch out for:
- A properly drafted Lady Bird Deed will not affect your Florida homestead tax exemption or Save Our Homes cap. However, if a non-lawyer (or even an attorney who is not well-versed in real estate law) attempts to draft a Lady Bird Deed, there could be issues with both of these.
- If there is a mortgage on the property, is it important not to trigger any due on transfer clause that may be in the mortgage. There will be documentary stamp taxes because of the mortgage. These costs should be considered when determining whether the Lady Bird Deed is a cost-effective alternative to avoiding probate.
- If after you sign and deliver the Lady Bird Deed you later want to change the remainder beneficiary to another person, a title insurance company or attorney providing an opinion of title may require you first obtain consent of the current remainder beneficiary and record the consent in the real estate public records.
- Lady Bird Deeds must meet all of the formalities required under Florida law for a deed to be valid. If it does not, the deed will not achieve your goal of transferring the property without probate.
Where did the name Lady Bird Deed come from?
Finally, you may be wondering how the Lady Bird Deed got its odd name. It is named after Lady Bird Johnson. The Florida lawyer who created the deed used the Johnson family in examples to show how the deed worked. However, contrary to many rumors, President Lyndon Johnson did not use this kind of deed to transfer property to his wife, Lady Bird.
This article is for general information only and not intended to provide legal advice in any specific situation. The facts of each situation are unique and it is necessary to evaluate a client’s needs and understand the complete picture before deciding on a Lady Bird Deed / Enhanced Life Estate Deed. Call us at 813-852-6500 to schedule a free 30-minute consultation with a board certified real estate attorney.