How a Florida Lady Bird Deed Form Works
A Florida lady bird deed form is a relatively new type of deed designed for a specific purpose: It allows Florida property owners to transfer property to others upon death without sacrificing control over the property during life. Here’s how it works:
- The current owner signs a deed transferring his or her Florida property to himself or herself for life, with the remainder to pass to another person or group of people (called the remaindermen or remainder beneficiaries) at death.
- The interest retained by the original owner—called a life estate—is coupled with powers that give the original owner ongoing control over the property. The original owner can sell, use, or otherwise deal with the property during life without involving the remainder beneficiaries. The original owner can even change his or her mind altogether and do something different with the property.
- The remainder beneficiaries have no rights to the property while the original owner is still alive. The original owner doesn’t need the consent of the remainder beneficiaries to sell or otherwise deal with the property. (This is the difference between a life estate deed and a lady bird)
- Upon the death of the original owner—and assuming the original owner didn’t change his or her mind—the property passes automatically to the remainder beneficiaries, without the need for
This ability to avoid probate at death—coupled with the original owner’s broad control over the property during life—makes lady bird deeds a popular estate planning tool in Florida.
Lady bird deeds are only recognized in five states: Florida, Michigan, Texas, Vermont, and West Virginia. Each state has its own requirements for validity, so it is important to use a lady bird deed form specifically designed for use in the state where the property is located. The Florida lady bird deeds created by our Deed Generator were designed by licensed Florida attorneys to meet the requirements of Florida law.
Pros and Cons of Lady Bird Deeds
Key Term: Lady Bird Deed. The term lady bird deed comes from a fact pattern used by Florida attorney Jerome Ira Solkoff in his teaching materials. Solkoff would use fictional characters to illustrate the use of this type of deed. One character was former United States President Lyndon Johnson’s wife, Claudia Alta “Lady Bird” Johnson. As Solkoff popularized this type of deed, people began to refer to it as the lady bird deed or ladybird deed instead of the technical name, enhanced life estate deed.
Lady bird deeds have several distinguishing features that make them excellent estate planning tools for Florida property owners:
- Avoiding Florida Probate – Lady bird deeds can avoid the need to administer or probate the property upon the death of the owner. The property simply passes to the named beneficiaries outside of the probate process.
- Retaining Control – The original owner keeps full control over the property during his or her life, including the ability to change his or her mind about the transfer.
- Medicaid Asset Protection – Florida lady bird deeds provide several Medicaid planning benefits. Under current regulations, a transfer by lady bird deed is not a countable transfer for purposes of determining Medicaid eligibility, and the property is not part of the estate that can be recovered by the state after the owner’s death.
- Retaining Homestead Exemption – Because a transfer by lady bird deed does not occur until death, signing and recording a lady bird deed does not affect the current owner’s homestead exemption. The significant property tax and asset protection benefits associated with Florida homestead law remain in place.
- Saving Taxes – Because of the retained interests held by a property owner that creates a Florida lady bird deed, federal tax law treats the property as though it was held until the owner’s death. This allows the property to qualify for a basis step-up that effectively erases any appreciation that accrued in the property, resulting in substantial income tax savings.
- Saving Legal Fees – Although some benefits of Florida lady bird deeds can be accomplished with a living trust, living trusts can be relatively expensive. Lady bird deeds can be just as effective, but cost much less.
Some title insurance companies will not insure lady bird deeds when those deeds are used to exclude a child from inheriting the property while giving the property to his or her siblings. This could create title issues in the future. If an enhanced life estate deed is being used to transfer property to children, it is good practice to include all children on the deed.
Lady bird deeds can also be invalidated by Florida homestead law. Florida Statutes § 732.401 provides that, if a deceased person is survived by a spouse and lineal descendants (children, grandchildren, etc.), then the surviving spouse gets a life estate in the homestead and the deceased owner’s lineal descendants receive a vested remainder interest. In this scenario, a lady bird deed cannot be used to change this requirement unless the spouse and children join in the conveyance.
Other Names for Florida Lady Bird Deeds
The technical name for a lady bird deed is enhanced life estate deed. The life estate included in the lady bird deed is “enhanced” by the broad powers retained by the original owner. Lady bird deeds are sometimes called ladybird deeds (without the space between lady and bird). These terms are used interchangeably in modern Florida real estate practice.
Relationship of Lady Bird Deed Form to Warranty of Title
Whether or not a deed is a lady bird deed is independent of warranties of title being conveyed. In other words, a lady bird deed could be a quitclaim deed, warranty deed, or special warranty deed. See What is the Right Title for Your Deed? For more information about deed titles.
Key Term: Warranty of Title. Title issues can be caused by many things, including errors in the public record, unknown liens against the property, undisclosed prior conveyances, forged deeds, missing heirs or unprobated wills, or disputes about boundary lines or surveys. Title issues often require legal action to fix and can decrease the value of real estate. If the property has no title issues, it is said to have clear title. A warranty of title is a legal guarantee from the transferor to the transferee that there are no title issues. If a deed makes a warranty of title, the transferee can sue the transferor over any title issues.
Comparison of Florida Lady Bird Deeds to Life Estate Deeds
A Florida lady bird deed form is a subcategory of life estate deed. Traditional life estate deeds also avoid probate, but they have a significant drawback: Once a traditional life estate deed is signed, the original owner cannot sell, mortgage, convey, gift, or otherwise terminate the remainder interest during his or her lifetime without the consent of the remainder beneficiaries. In other words, the original owner can’t change his or her mind without involving the future owners. Lady bird deeds avoid this problem by giving the original owner “enhanced” power to deal with the property without the consent of the remainder beneficiaries.
Application of Florida Documentary Stamp Tax
Although the Florida documentary stamp tax applies to transfers of real estate by deed, lady bird deeds escape taxation in most circumstances. The Florida Department of Revenue does not assess a full documentary stamp tax if the person who transfers the property is the same person that retains the life interest. Instead, the deed is only assessed a minimum documentary stamp tax (usually $0.70) when the lady bird deed is filed. If the property is not sold by the date of the grantor’s death, it becomes subject to full documentary stamp taxes at that time.
How to Create a Florida Lady Bird Deed
Although lady bird deeds are common in Florida and have been recognized by the Florida government, they are not based on a specific statute. Lady bird deeds were created by attorneys to help clients avoid probate at death while retaining control over the property during life. Their validity does not depend on statutory authorization, but whether title companies will insure them.
Because the Florida lady bird deed form is not defined by statute, it is important to use a form of lady bird deed that is customarily recognized by title insurance companies in the state where the property is located. The Florida lady bird deeds created by our Deed Generator are based on well-accepted forms that are routinely insured by title companies in Florida.