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“Lady Bird” Deeds vs. Quitclaim Deeds: Key Differences and Advantages

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What is a Deed?

Several types of property deeds are legally valid in the State of Texas. Which type of deed should you create when you sell a property? Which type of deed should you expect when you buy a property? Your first step should be discussing the matter with a Waco estate planning attorney.

A deed is a written document that conveys the legal title to real property. When you sell a property, you usually create a new deed as written proof that you have transferred your ownership rights – your “title” – to someone else. However, not all deeds are alike.

The only way that a buyer takes title to a property is through a deed, but there are several types: for example, “lady bird” deeds and “quitclaim” deeds are two different deeds that accomplish different things. How are lady bird and quitclaim deeds similar? How do they differ? What else should you know about lady bird and quitclaim deeds?

What Makes a Deed Valid in Texas?

Usually, a deed is a document that conveys “title,” the actual ownership of a property. The deed itself is a legal document; title is the legal right of ownership conveyed by the deed.

To be valid under Texas law, deeds must:

  1.  be put in writing
  2.  be signed by the seller (called the “grantor”)
  3.  clearly state any intent to transfer the property
  4.  designate the buyer (called the “grantee”) by name
  5.  include the property’s legal description
  6.  be sent by the grantor and received by the grantee

How Do Lady Bird Deeds Work?

A lady bird deed – a revocable deed that retains a life estate – can give the owner of a property considerable advantages. He or she (the grantor) may transfer the ownership of a property to another party (the grantee) while retaining the lifelong right to reside on, use, or sell the property.

With a conventional life estate deed, as the estate’s holder and grantor, you owe the grantee a duty to maintain the property’s value, and you may not:

  1.  mortgage or sell the property unless the grantee consents
  2.  designate another grantee without the current grantee’s consent
  3.  unilaterally rescind the grantee’s remainder interest and cancel the deed

However, unlike life estate deeds, lady bird deeds may be revised or even revoked by the grantor at any time and without the consent of the grantee. If a grantor did not transfer the property, it passes to the grantee upon the grantor’s death – with no probate court interference.

What Are a Lady Bird Deed’s Disadvantages?

Some title companies in Texas may require signatures of the beneficiaries, when selling a home that has a lady bird deed on it. This is not the way it should work, based on the nature of the Lady Bird Deed, but does occasionally happen. This can often be circumvented, by using a more agreeable title company.

Additionally, lady bird deeds apply only to real property. Other assets in Texas must be handled with a trust, a will, or another estate planning tool. A Waco estate planning lawyer can prepare a lady bird deed as well as any of the other estate planning documents you need.

What is a Quitclaim Deed?

Conventional warranty deeds protect a title from conflicting title claims and ensure that the deed is in fact legal. A quitclaim deed does not provide that assurance. Rather than convey a seller’s interest, a quitclaim merely releases the seller from any claim to or interest in the property.

While a quitclaim deed may be a good option for the transfer of property among family members, in Texas, most insurance companies will not insure homes with a quitclaim deed in the title chain.

In Texas, you should not buy or sell a property with a quitclaim deed without consulting a Waco estate planning attorney. In fact, you should consult an estate planning attorney to advise you – and to protect your long-term interests – whenever you buy or sell real property in this state.

How Can a Lady Bird Deed Help Someone Plan for Medicaid?

Due to skyrocketing nursing home costs and because many insurance companies no longer even sell long-term care policies, Medicaid is the practical long-term healthcare option for a growing number of Texans. To qualify, however, your income and assets cannot exceed certain thresholds.

Equity in your primary residence is usually excluded when your assets and properties are determined for Medicaid purposes, but if you transferred property for less than its market value in the previous five years (the Medicaid “look-back” period), you may not qualify for Medicaid.

However, a lady bird deed can make the difference. Under Medicaid’s look-back provisions, lady bird deeds do not legally establish a property transfer. And as property with a lady bird deed is not probated, it’s also not subject to this state’s Medicaid Estate Recovery Program.

What Else Do You Need to Know?

Whether you plan to transfer your properties and assets to your beneficiaries with a trust, a will, a lady bird deed, or some other legal document, that document should be part of a personalized and comprehensive estate plan that ensures the financial security of your family and loved ones.

In many situations, a lady bird deed is going to meet a property owner’s needs. In some rare situations, a quitclaim deed may be the practical answer. In this state, you have a number of options.

If you’re on either side of a property transaction, have an estate planning attorney explain those options. You’ll need someone with experience, knowledge, and a reputation for legal excellence, but most of all, you’ll need an attorney that you like, you’re comfortable with, and you trust.

At Rainey & Rainey, We Help Our Clients Plan for the Future

We don’t know what will happen tomorrow, but we can be prepared for it. At Rainey and Rainey, a Waco estate planning lawyer will help you plan for the future, protect your interests, and make sure that your family has security in the years ahead.

If you are in or near the Georgetown, Austin, or Waco area, reach out to the offices of Rainey & Rainey to prepare:

  1.  a lady bird deed, quitclaim deed, or another property deed
  2.  a medical or financial power of attorney
  3.  a Will or a trust
  4.  an advance medical directive or living will

The legal team at Rainey & Rainey represents and advises clients in matters related to property transactions, estate planning, healthcare planning, guardianship, and probate. To learn more, or to prepare the documents you need, contact Rainey & Rainey now at 254-457-5083.

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