What is a “Lady Bird Deed”?
Many individuals would like their family members, usually children, to receive their real property upon their death. Additionally, they would prefer that the property not go through Probate Court.
Often, they will simply add their children’s names on to the deed; however, this may not be a good idea. If the children are added as joint tenants, they will have rights in the property and the parent will not be able to sell the property without the permission of the children.
A better solution is the “Lady Bird” Deed. Another name for this is the Enhanced Life Estate Deed.
This type of deed transfers the property to themselves and their children. The difference is that they retain (hold back) a life estate and an ability to sell the property at any time.
Why is this better? The parents still own the property and can sell or give it away at any time without any interference from their children. If they still own the property at the time of death, the property will pass to the children.
This avoids probate court. It avoids an increase in the taxable value for property tax purposes (the so called “pop up”) and it avoids capital gains because the children do not receive any value until the parents pass away. Therefore, the children still get a stepped-up basis for income tax purposes.
For individuals that do not want to have their property in a trust, yet want to avoid Probate, the Lady Bird Deed is a convenient and easy manner to transfer real property to the next generation.