Lady Bird Deeds

What Is a Lady Bird Deed?

A handful of states allow homeowners to establish lady bird deeds, and Texas is one of them. This deed essentially lets homeowners retain complete ownership and control over their property until the moment they pass away, at which point it is automatically transferred to their designated heir. To complete the transfer, the beneficiary only needs to file an affidavit of death and the death certificate with the county recorder’s office. If you’re somewhat unfamiliar with estate planning, you may be wondering, Can’t I just write this into my will? Although you can use a will, doing so will likely cause your beneficiaries to pay more than they needed to in taxes.

Denton Lady Bird deed Laywer

Do you know what will happen to your estate when you pass away? If you’re like most people, you assume it will automatically go to your children and loved ones—after all, you worked hard your whole life to buy it. Unfortunately, that’s not always the case. The reality is that the beneficiaries of your home may be subjected to financial penalties that complicate their inheritance. If you’re thinking, ‘That’s not fair!’, you’re not the only one. Luckily, you can take certain actions now to prevent this situation. In Texas, homeowners can file something called a lady bird deed (also called an enhanced life estate deed) to protect their beneficiaries from fees and taxes. While extremely useful, these deeds are not always straightforward. Fortunately, an experienced lady bird deed attorney can make sure your family is protected. Keep reading to find out how. At Hunter Sargent, PLLC, we take your family’s financial future seriously. Our Denton estate planning attorneys can help ensure your loved ones’ prosperity for years to come. Ready to get started? Contact us online or give us a call at (940) 594-7754 today.

Why Choose a Lady Bird Deed?

As bizarre as it is, the government won’t let your death stop them from taxing you. According to the IRS, the estate tax is “a tax on your right to transfer property at your death,” which is one of the reasons it’s often referred to as a “death tax.” This means that when a person dies, the federal and/or state government will assess the estate’s worth and claim a percentage in a process called probate.

Federal Taxes

Even though Texas doesn’t have an inheritance tax, beneficiaries may still be subject to federal inheritance taxes, depending on the estate’s value. However, most Americans will not be subject to this because the federal government exempts estates whose value is less than roughly $12 million. Any taxable estate value over $12 million will be taxed at a whopping 40 percent. Luckily, there’s an easy way to avoid these steep taxes. When you put your home in a lady bird deed, it isn’t included in your estate at your death, meaning it can’t be taxed. It also incurs no federal gift tax because no immediate value is transferred to the grantee when it’s created.

Medicaid Estate Recovery Program

If you are receiving Medicaid, the state may try to use the Medicaid Estate Recovery Program (MERP) to go back and charge you for medical care after you’ve passed. They do this by subtracting your health costs from your estate’s value. Under current Texas law, MERP can’t be enacted unless your home goes through formal probate procedure, which is the legal process of assessing assets, generally through a will. However, you can avoid probate of the property entirely by putting it into a lady bird trust.

Is a Lady Bird Deed Right for You?

When it comes to estate planning, there is no one-size-fits-all solution. Figuring out what’s best for you will require speaking with an estate planning attorney in Denton about your assets and options. If you’re interested in using a lady bird deed, take some time to learn about its distinct advantages and disadvantages before getting started.

Advantages of a Lady Bird Deed

Lady bird deeds are ideal for people who have large property assets that would ordinarily be subject to federal taxes upon their death. Here are some of the key advantages these deeds offer to their grantors:

The right to continue to use and profit from the property during their lifetime.
The ability to revoke the deed at any time.
The property is not included in the estate upon their death, but transferred automatically to the designated beneficiary.
It avoids federal gift tax because it offers no present value to the grantee when the deed is created.
If the grantor needs Medicaid assistance, a lady bird deed helps preserve assets.

Disadvantages of a Lady Bird Deed

Although a powerful tool for Texas homeowners, the lady bird deed isn’t right for everyone. Because it only deals with real property, this deed fails to address other types of inheritance. Here are some of its possible disadvantages:

Financial assets that are not real property must still be addressed through a will, a trust or another instrument.

A lady bird deed does not establish guardianship for children.

A lady bird deed is not ideal for multiple beneficiaries, as they’ll still need to establish consensus on how the property should be managed.

Title insurance companies are sometimes reluctant to insure titles to properties subject to lady bird deeds.

A lady bird deed doesn’t specify what happens if the grantee passes before the grantor.

As you can see, lady bird deeds are not a catch-all for estate planning. Although they offer tremendous benefits to some people, they may not be right for you. The best way to find out is by speaking to an experienced asset protection planning attorney in Denton.

Lady Bird Deeds FAQ

If this is your first time learning about lady bird deeds, you probably have a lot of questions. You may find the answers to some of them in our FAQ section.
Can I prepare my own lady bird deed? You can find many legal forms online, including the Texas lady bird deed form. However, unless you have estate planning expertise, we wouldn’t recommend preparing it by yourself. When your family’s financial future is on the line, it’s smarter to work with a professional. How much does it cost to file a lady bird deed? If you prepare the lady bird deed by yourself, it could cost you as little as $30. However, you run the risk of making critical mistakes that end up costing your family much more than the couple hundred dollars it would have cost you to hire a lawyer.
Can a lady bird deed be revoked? A lady bird deed can be revoked at any time by the grantor. It can also be overturned if the grantor lacked the mental capacity to execute the deed.
Why is it called a lady bird deed? Technically, this deed’s name is the enhanced life estate deed. It got its nickname when President Lyndon B. Johnson used it to pass property to his wife, Lady Bird Johnson.
How can a lady bird deed attorney help me? A lady bird deed attorney does a lot more than just fill out paperwork. They ensure accuracy, expediency and efficiency. Their expertise allows them to determine whether a lady bird deed is truly right for you, or whether you’d benefit more from a different estate planning tool.

Hunter Sargent, PLLC: Premier Estate Planning Attorneys

If you’re like most Texans, nothing is more important to you than ensuring your family’s financial security. However, it’s not always easy to do. The reality is that even if you’re wealthy, your family could suffer financially from your poor estate planning. We want to stop that from happening. If you’re unsure about how your property will be managed after your death, it’s time to take the initiative to plan it. The highly trusted estate planning attorneys at Hunter Sargent, PLLC, are ready to take the journey with you. Contact us online or give us a call at (940) 594-7754 to schedule a consultation.