Many individuals wish to pass their property down to their heirs without probate. One way to do this is with a life estate deed where the owner retains possession of the property while they (or another person) are alive, and then another person becomes the fee simple owner of the property. However, this type of deed does not allow the holder of the life estate to mortgage, lease, rent or sell the property without the consent of the person or persons who will be receiving the property after death (known as remaindermen). In Florida, there is a special way that the property can be devised that is known as either an enhanced life estate or “Lady Bird” deed.
A Lady Bird deed is a deed where the grantor transfers an enhanced life estate to himself with the remainder to pass to joint tenants with rights of survivorship. The enhanced life estate allows the grantor/life tenant to retain the right to mortgage, encumber or otherwise deal with the real property during his or her lifetime, which the holder of a typical life estate does not have. The Lady Bird deed form can be used for homestead, as well as other real estate. The biggest advantage is the grantor keeps control of the property, conveys future title to heirs by deed, and skips probate.
Additional benefits of a Lady Bird deed include the life estate owner retaining all control of the property and being able to lease, mortgage or otherwise make transactions on the property. Furthermore, if an heir has a judgment, the grantor can make a new deed and remove the heir with a judgment. A creditor of the heir cannot make a claim on the property, as the heir only has a future interest, subject to divestment. Additionally, the life estate owner is able to keep the full homestead exemption from property taxes. Additionally, if the property is a condo, the heirs do not have to apply for approval from the association until the death of the owner, which saves a lot of time and hassle depending on the condominium association.
However, there are some drawbacks to the Lady Bird deed. First, there is no contingency planning with this deed. For example, with a will or trust, you can plan for various contingencies. However, a Lady Bird deed does not provide this benefit. Additionally, if the grantor of the Lady Bird deed has a spouse and minor children and the property is the homestead of the grantor, the deed may violate the Homestead Devise restriction in Article X, Section 4 of the Florida Constitution. Finally, a bank or title company may not understand the Lady Bird deed, which could cause some confusion down the road in the case of a mortgage or transfer of the property. The Lady Bird deed may look like a great option at first, but you must think about all the advantages and disadvantages of this deed along with the rest of your estate.
The aforementioned tactics are among a multitude of factors to take into consideration when drafting estate planning documents. Due to specific assets or liabilities you may have, there may be other ways to pass your property to your heirs. While a lady bird deed seems like an easy way to transfer property to heirs without probate, it does have its pitfalls. It is better to plan thoroughly on the front end rather than litigate on the back end.
If you are interested in learning what is right for your estate planning needs, please call 321-255-2332 to set up a free estate planning consultation.