What is a Lady Bird Deed?
A “Lady Bird” deed is a kind of deed in Texas that transfers a property to a new owner when the current owner dies, allowing the property to avoid the probate process. Whether you should prepare a lady bird deed is a question you should discuss with a Central Texas estate planning lawyer.
A lady bird deed also lets the current owner of a Texas property retain control over the property during their lifetime. This can reduce tensions between children and step parents in blended families. In addition to the distinct advantages offered by such a deed, however, there may also be disadvantages.
Do you need a lady bird deed? What are the advantages and disadvantages of having a lady bird deed? When should you seek the advice and services of a Waco probate attorney? Keep reading for the answers that, either now or in the future, you and your loved ones may need.
How Does a Lady Bird Deed Work?
A lady bird deed (formally called an enhanced life estate deed) allows a property owner in Texas to transfer property to others automatically upon the property owner’s death. The property owner maintains the use, control, and ownership of the property while he or she is still alive.
In the state of Texas, the holder of a lady bird deed may rent, sell, or otherwise use the property without the involvement of the grantees/ beneficiaries. The beneficiaries have no legal rights to the property and their consent is not required to sell the property during the lifetime of the deed holder.
The main benefit of a lady bird deed is probate avoidance. If the holder of a valid lady bird deed did not otherwise transfer the property or cancel the deed, the property passes automatically to the grantees/ beneficiaries upon the deed holder’s death without interference from a probate court.
What Are the Other Benefits of a Lady Bird Deed?
In the State of Texas, lady bird deeds can be easily amended or revoked. The deed owner is free to change his or her mind at any time and change the deed accordingly.
A lady bird deed should be considered before a Texas homeowner applies for Medicaid benefits. Though a primary residence is not usually counted toward Medicaid eligibility, a lady bird deed can ensure that the property remains protected when you submit a Medicaid claim and after your death.
A lady bird deed costs less than a trust, but may cost more to prepare than a conventional deed. A lady bird deed preserves the Texas homestead exemption, saving twenty to thirty percent in taxes. This is important because property taxes in Texas are some of the highest in the nation.
Does a Lady Bird Deed Entail Any Disadvantages?
Although a lady bird deed preserves the Texas homestead exemption, the taxable value of your property may increase when it transfers to your beneficiary at the time of your death.
In addition, some Texas title insurance companies may refuse to insure a property subject to a lady bird deed, or may charge more for insurance. More often, a title company will likely require the approval of the beneficiaries before the sale of the property can take place.
How Can Lady Bird Deeds Help Blended Families?
A lady bird deed can be a practical estate planning tool for newlyweds with children from a prior marriage. A lady bird deed protects the interests of your new spouse as well as the interests of the children from your prior marriage.
An issue that often causes conflict in blended families is determining what will happen to someone’s home. After you pass away, your second spouse may want to continue residing in your marital home, but your children from your first marriage may expect to inherit that home.
You and your Waco probate attorney can prepare a lady bird deed that grants the second spouse a lifetime right to reside in that home and the right to use and live on that property as he or she sees fit.
That lady bird deed also ensures that the ownership of the home passes to the beneficiaries after your second spouse passes away. The lady bird deed lets you grant to your spouse the lifelong right to stay in the home while still safeguarding your children’s interest in the home.
How is a Lady Bird Deed Prepared?
It is never too early to discuss your many estate planning options with a Texas estate planning lawyer. If you choose to have a lady bird deed, your Waco estate planning lawyer will prepare that deed on your behalf.
A lady bird deed must include:
- a legal description of the property
- your name and the names of your beneficiaries
- a provision that reserves your lifetime rights to the property
What Else Should You Know About Lady Bird Deeds?
Whether you are single, married for the first time, or part of a blended family, you will have to make a decision at some point about who will inherit your home, and you will also have to decide on the best way to leave and transfer that inheritance.
Whether you transfer your assets and properties with a will, a trust, and/or a lady bird deed or another estate planning tool, having a comprehensive and personalized estate plan prepared by your attorney ensures that your loved ones will have financial security after you’re gone.
But there are literally thousands of attorneys in Texas. Where can you find a Texas estate planning lawyer who has the knowledge, experience, and integrity you need?
Put the Team at Rainey & Rainey to Work for You
In or near Waco, Austin, and Georgetown, you won’t have to search extensively for the right estate planning lawyer. An estate planning lawyer at Rainey & Rainey can prepare a lady bird deed, a trust, a last Will and Testament, and the other estate planning documents you may need.
There is no way to know the future, but at Rainey & Rainey, we can help you prepare for it. We will help you ensure that your loved ones are cared for properly – after a second marriage and even after you’ve passed away.
To learn more, prepare a lady bird deed or another estate planning document, or set up a comprehensive estate plan, call Rainey & Rainey today at 254-457-5083. Our offices are conveniently located in Georgetown and Waco, and we provide estate planning services throughout the State of Texas. Let us help you plan for the future.