Using the Lady Bird Deed for Estate Planning

A lady bird deed, which is also known as an “enhanced life estate deed”, is a strategy where an individual transfers property to someone else outside of probate while retaining a life estate in the property. The lady bird deed takes its name from Lady Bird Johnson, whose husband, President Lyndon Johnson utilized this enhanced life estate deed strategy for asset preservation in the 1980’s. The lady bird deed is often times used for Medicaid planning as well as probate avoidance. The downfall to the enhanced life estate deed is that it is only recognized in a few states, including, but not limited to: Florida, Michigan and Texas. Also important to note is that the alternative to a lady bird deed is setting up a revocable trust and deeding the property to the revocable trust for probate avoidance.

This enhanced life estate deed is different from other life estate deeds in that the life tenant can commit waste, sell or even encumber the property without the consent of the remainderman or anyone else. With the traditional life estate deed, the remainderman must join in the consent to sell or mortgage the subject property. The life estate terminates upon the life tenant’s death, and the beneficiary of the remainder interest (the remainderman) becomes the immediate owner of the property at the same time. Typically, all that the remainderman has to do is record the life tenant’s death certificate and no estate tax due affidavit to formalize the transfer of the property outside of probate. A knowledgeable attorney should draft the enhanced life estate deed in order to ensure that the deed contains all of the proper provisions required to retain such enhanced control over the property during a life tenant’s lifetime.

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