Attorneys Stephen Korshak and Lee Karina Dani

What’s a Lady Bird deed’s role in an estate plan?

On Behalf of | Apr 22, 2024 | Estate Planning |

Crafting a comprehensive estate plan is a critical undertaking for any adult. One of the primary goals of this kind of plan is to provide a legal way to pass down assets. One option for passing certain assets along to loved ones after death is a Lady Bird deed, which is also known as the life estate deed.

A Lady Bird deed offers an estate plan creator a way to transfer property to a chosen beneficiary while retaining full control over their property during their lifetime. The creator can still, for example, attach a second mortgage on it while they’re living. Once they pass away, the property is transferred to the beneficiary that’s named on the Lady Bird deed.

Lady Bird deed benefits the creator and beneficiary

The Lady Bird deed offers several advantages. These include both financial and estate planning benefits. One of the primary advantages is that the property doesn’t have to go through probate. This enables them to retain privacy.

This type of deed allows the property to be excluded from an estate for Medicaid purposes. This means that a person can qualify for long-term care using Medicaid coverage if they’re eligible without the property counting as an asset. The property also can’t be counted as an asset for recovery.

There are also tax benefits to using a Lady Bird deed as part of an estate plan. The beneficiary who receives the property has a step-up for tax purposes. This means that the property value is automatically adjust to the market value at the time the owner passes away. This can reduce capital gains tax if the beneficiary opts to sell the property.

Yet, a Lady Bird deed has specific limitations. For example, it’s only valid in some states. Florida recognizes these deeds, so it’s a viable option for individuals here. Because this is only part of a comprehensive estate plan, it’s critical for anyone considering one to discuss their situation with a legal representative who can assist them with getting their estate plans set up to reflect their wishes overall.