Authored By: Scott W. Dunlap, Esq. sdunlap@dunlapmoran.com
Lady Bird deeds (or what more formally are known as enhanced life estate deeds), are now approved for use in the state of Florida. Several other states as well have approved use of this type of deed. In order to understand the unique and beneficial qualities of a Lady Bird deed, it is first necessary to understand the traditional life estate deed.
With a traditional life estate deed, the owner of the real property reserves the right to live and enjoy the property until the owner’s death, at which time the property automatically passes to the beneficiary named in the deed (the remainderman). The primary drawback to the traditional life estate, is that the life estate grantor can only sell or mortgage the subject property with the consent of the remainderman/ beneficiary.
The Lady Bird deed is similar to a traditional to a life estate deed, in that the owner is in essence conveying a future interest in the property during the owner’s lifetime. However, with the use of a Lady Bird deed the owner may sell, use and mortgage the property during the owner’s lifetime without the consent of any of the beneficiaries/ remaindermen named under the Lady Bird deed. The Lady Bird deed is also, typically “tax neutral” during the owner’s lifetime, as there is no gift or other transfer of title until the grantor passes away, and then only in the event that the property is still owned by the grantor at the date of death.
Under current Florida law, the transfer of title to the beneficiary named in the Lady Bird deed, once the owner passes, is a transfer occurring outside of probate. The use of a Lady Bird deed can be used, therefore, as an estate planning tool and in some cases it may be more cost effective than utilizing a living trust or revocable trust.
Care must be taken to properly draft a Lady Bird deed, so as to ensure the provisions required for the Lady Bird deed are in fact contained in the deed. Care must also be taken in the event that the beneficiary or remainderman named in the deed predeceases the owner. Similarly, multiple remaindermen/ beneficiaries named in the deed may complicate things. Some lenders may be reluctant to make mortgage loans secured by property subject to a Lady Bird deed, given that the lender may not understand that the beneficiary’s interest is non-vested.
In sum, the use of a Lady Bird deed can be a useful and cost-effective tool in the state of Florida.
Any time you are involved in a transaction where the parties are discussing the use of a Lady Bird Deed, be sure to contact a Florida licensed real estate attorney to assist.
This blog is intended for informational purposes only and it is not intended to be, nor should it be construed as, legal advice or legal opinion. The reader should not consider this information to be an invitation to an attorney/client relationship, should not rely on information presented here for any purpose, and should always seek the legal advice of counsel in the appropriate jurisdiction.
