What Happens to a Lady Bird Deed After the Homeowner Passes Away in Florida?

As a property owner, one of the worries you may have is how to pass that property down to your loved ones when you die without having to go through the probate process. Some people in Florida choose revocable living trusts to accomplish this, but these can be complicated and costly. They might also impact your tax liability, which is certainly something you don’t want.

There’s another option in Florida, however. You can also create a lady bird deed, which you may have heard called an “enhanced life estate deed.”

If you’re perfecting your estate planning strategies, a lady bird deeds lawyer in Florida can help you understand whether this is the right choice for your family. At William C. Roof Law Group, our team has decades of experience helping the people of Florida protect their assets. Take a closer look at what lady bird deeds in Florida involve and how our team can make a difference.

A lady bird deed is an estate planning tool that helps you avoid probate for your real estate. You essentially give yourself a life estate interest in your property, meaning that you have a right to live on your property until your death. Once this occurs, the property passes to your beneficiaries, also called remaindermen.

This enhanced life estate deed gives you complete control over the real estate during your lifetime, meaning you can use, sell, mortgage, or do as you please with it without needing permission from the remainder beneficiaries. You can even change beneficiaries.

Lady bird deeds have significant benefits, including being important tools to help you maintain homestead property for tax purposes. They can also protect your Medicaid eligibility and positively impact your taxes.

If you’ve been considering this option, one question you may have is: what happens to a lady bird deed after the homeowner passes away in Florida? Upon your death, the property title automatically transfers to your beneficiaries, but it can help to have an understanding of the process of setting up these deeds as a whole.

For a lady bird deed to be legally recognized, it has to have a grantor. The grantor is the property owner. The grantor creates the enhanced life estate deed, which gives the owner control over the property until their death, and they also assign remainder beneficiaries. These beneficiaries must have no ownership interest in the property while the grantor lives.

Florida lady bird deeds also require a full legal description. This is the property’s identification as it’s written on public record. If the lady bird deed is established on a homestead property, it must also contain a provision that states it will remain the grantor’s homestead, which protects the property and allows you to maintain tax exemptions.

Lady bird deeds lawyers in Florida often recommend this estate planning tool because it offers significant benefits.

One of the main reasons why people opt for lady bird deeds is because they allow you to avoid probate court for the deeded real property. Under Florida law, any assets that are titled individually under your name and which have no survivorship provision or designated beneficiaries are subject to probate.

With a lady bird deed, your interest disappears upon your death, and the remainder beneficiary listed in the deed directly inherits the property. The property transfers legally as soon as the beneficiary takes the death certificate to the appropriate county clerk.

Florida has a homestead tax exemption, so ensuring that you maintain your homestead avoids tax consequences. Doing so means you don’t have to worry about your property taxes increasing just because you changed the name in the deed.

Additionally, being able to maintain your Florida homestead status means that the property is protected from forced sale. A creditor won’t be able to make you sell the property, though they can still place a lien on it.

In Florida, Medicaid considers all of your assets when deciding whether you’re eligible. Homestead properties aren’t typically counted in this assessment. Because the lady bird deed allows you to maintain homestead rights, that’s not an issue that you have to worry about.

An important difference between a lady bird deed and a traditional life estate deed is that the latter triggers a five-year waiting period for Medicaid benefits. Since the lady bird deed isn’t a transfer of ownership, you will likely not experience this waiting period.

One important benefit of lady bird deeds is that they’re generally fast and relatively simple to create. With a Florida attorney helping you, this probate avoidance tool often takes only a short time to put together, leaving you free to focus on other matters.

Lady bird deeds aren’t considered completed gifts for estate tax purposes. Upon the owner’s death, the property will be distributed to the beneficiaries on a step-up basis. This means that the heirs can sell the property without worrying about income tax consequences.

A lady bird deed can also keep you from having to pay a gift tax. Unlike a standard life estate deed, a lady bird deed in Florida gives you the chance to cancel the remainder interest you granted the beneficiary, so it’s not considered a gift.

A Florida lady bird deed also protects your property from being sold after your death to pay for the Medicaid benefits that you received. The deed will transfer property to your beneficiaries immediately upon your death, so it will no longer be part of your estate. This typically means that Medicaid won’t be able to touch it.

Florida lady bird deeds make you a life tenant on your property while still giving you control over what you do with it. As the property owner, you can alter, sell, or mortgage the asset without needing permission from the beneficiaries. That’s very different from traditional life estate deeds.

Lady bird deeds and traditional life estate deeds are usually compared because they do share similarities. They are both used to avoid probate, which saves your beneficiaries time and money. With both of these deeds, you retain control of the property for the rest of your life, with one significant difference: a traditional life estate deed doesn’t allow you to sell or mortgage the property without permission from the beneficiaries.

Another significant difference is that a life estate deed could still allow the property to count as assets for Medicaid, potentially putting your eligibility at risk. That’s not the case with lady bird deeds, though. Additionally, beneficiaries may face gift tax and capital gains tax issues with a life estate deed that they wouldn’t face with a lady bird deed.

A quitclaim deed is another option that people consider. However, a quitclaim deed immediately transfers the property to the beneficiaries, so you lose all control over it. It can be an appropriate option for some, but if you’re looking to still manage the property, a lady bird deed may still be the best choice.

Living trusts are yet another estate planning option you have. This can be a good option if you have other assets besides actual property that you want to place in a trust. Lady bird deeds only work for real estate.

Keep in mind that these enhanced life estate deeds are available only in some states, Florida included. Even if you live in Florida, however, property outside of the state will have to go through probate after your death unless you have a living trust.

Enhanced life estate deeds aren’t typically complicated to set up, but it’s still vital to consult with an attorney to ensure each step is completed correctly.

The first step is to get the legal description of the property. This doesn’t mean the address, but rather how the estate is described by the county. The description helps to identify the property accurately. It should always match county records.

You will need to clearly identify the beneficiaries. Keep in mind that you can make changes to the deed at any point if you decide to choose another beneficiary or even if you want to revoke the lady bird deed altogether.

You will then need to draft the lady bird deed. This isn’t something you should do on your own. Instead, it’s important to have experienced lawyers helping you, which can help you avoid pitfalls that could end up causing you tax issues and other legal headaches later.

One of the things you want to ensure is that Florida title insurance companies see the deed as valid. Additionally, you’ll need to make certain that the wording clearly states that it’s an enhanced life estate deed and not a traditional life estate deed.

Once you’re satisfied with the deed, you will need to sign it in front of two witnesses. You’ll then have to file it in the country records.

Lady bird deeds are relatively low-maintenance deeds when compared with other options. It’s still essential that you know about possible issues that could arise, though. Unclear deed language could be a concern and could result in disputes later on, so ensuring that you have a detailed and transparent drafting process can make a difference.

It’s also important to have open communication and consensus among all involved parties. As a grantor, you should speak with the beneficiaries about property use and maintenance, and it can be a good idea to offer updates on anything involving the property. You’re not required to do this, but it can be helpful for the beneficiaries.

Beneficiaries aren’t always sure of what to expect once the grantor dies. Here are the steps that will take place with a lady bird deed.

The moment that the grantor dies, the ownership is immediately transferred to the remainder beneficiary. The property bypasses the probate process, making the transfer of rights much faster.

Once a beneficiary presents the death certificate at the appropriate county clerk’s office, the property’s title changes. This is the step that makes the transfer of ownership legal.

Even though the property doesn’t go through probate, the beneficiaries should still review it to understand if there are any liens or outstanding claims against it. Some remaining financial obligations could affect the property, so having a clear idea of these obligations makes it easier for beneficiaries to manage their assets.

It’s never too early to start planning what will happen to your assets once you’re no longer there to maintain them. You may worry about putting loved ones through the complexities of probate court. The answer could be lady bird deeds.

For the best results, it’s essential to have a skilled lawyer helping you through the process of setting up these deeds. A lawyer can tell you whether the deed will impact your taxes or Medicaid eligibility, and they can make certain that everything is worded clearly so that no ambiguities lead to disputes later on.

At William C. Roof Law Group, we offer comprehensive estate planning services in Florida that can help you leave your assets in order. We have decades of experience with everything from probate administration to lady bird deeds and trusts, both inside and outside of the courtroom.

We know how important estate planning is for your family’s future, which is why we offer free initial consultations to ensure that people who are searching for assistance don’t hesitate to receive it. Contact the team at William C. Roof Law Group to learn more about lady bird deeds and other options today.

The contents of this article are not comprehensive, they provide only a general overview of the subject matter discussed. This article does not establish a client-attorney relationship with the reader, and no legal decisions should be made based on the article’s contents. Because every legal matter arises under unique facts specific to the client, no legal decision should be made without consulting a licensed attorney.