What is a Lady Bird deed? What are its pros and cons?

If you have limited assets and can’t create a living revocable trust, a well-drafted Lady Bird deed offers a valuable alternative to help you avoid probate. If this kind of arrangement fits your situation, and you live in Florida, Texas, Michigan, Vermont, or West Virginia, this blog is tailored for you. 

You can create a Lady Bird deed, also known as an enhanced life estate deed. It’s a legal document used in estate planning to transfer real property to remainder beneficiaries while retaining certain rights during the grantor’s lifetime. Lady Bird deeds are commonly in the case of residential properties. But, they may not be appropriate for commercial real estate or property held jointly with others.

What is a Lady Bird deed, in the real estate industry?

A Lady Bird deed is a special kind of deed that lets you name someone to inherit your home or property when you pass away while allowing you to keep living in it. Interestingly, the term “ladybird” may have come from former U.S. First Lady Claudia “Lady Bird” Johnson. But, some say it was coined by a Florida attorney named Jerome Ira Solkoff who used the name in fictional scenarios to explain elder law concepts.

Unlike a basic life estate deed, you can change or cancel a Lady Bird deed while you’re alive. This flexibility is the reason it’s also called an “enhanced life estate” deed. 

This type of life estate deed can only be used in states where title insurance for the property can be secured. It’s available only in U.S. states such as Florida, Texas, Michigan, Vermont, and West Virginia. While you could technically still use one, there’s no guarantee that the property can be insured. For instance, California does not recognize Lady Bird deeds. Instead, California residents may explore other estate planning options such as revocable living trusts or transfer-on-death deeds

Why do homeowners use a Lady Bird deed?

Property owners use Lady Bird deeds mainly to qualify for Medicaid benefits while ensuring their assets stay in the family. If you need Medicaid to pay for medical or long-term care such as nursing homes, the state might try to recover those costs from your assets after you die, through estate recovery. However, this deed can help transfer a home to a family member and shield it from the state’s reach. And, you can avoid probate for your property. The unique deed lets you keep control of your property while you’re alive, and it passes directly to a chosen beneficiary when you pass away, without needing probate. 

How does this deed work?

A Lady Bird deed works differently from a standard life estate deed. With a standard deed, you can name a beneficiary to inherit your property while you retain ownership, but it comes with many restrictions. You may not be able to sell or mortgage the property, and you could be liable to the beneficiary if you significantly decrease the property’s value.

In contrast, a Lady Bird deed is a way to pass down your property without it going through probate, which is a costly and time-consuming legal process.

Here’s how it works:

During your lifetime, you have full control of the property as the life tenant. Unlike standard life estate deeds, you can make changes to the property or the deed anytime. This includes selling or mortgaging the property, without needing approval from your beneficiaries.

At your death, the property automatically transfers to the beneficiary or beneficiaries you named in the deed – either individuals or a property trust. 

It allows you to avoid probate proceedings for your property, retain the freedom to modify or sell the property at your discretion or revoke the deed without incurring federal gift tax implications. Additionally, it safeguards your eligibility for Medicaid – all the while preventing the property from being liquidated to settle Medicaid debts following your passing.

What are the advantages of a Lady Bird deed?

There are several benefits of Lady Bird for estate planning in states that recognize them. Let’s list some of the ladybird deed advantages.

• The deed helps the owner sidestep the need for probate court, simplifying the transfer of property after death.
• The original owner can retain complete control over the property. They may change or sell it without involving the beneficiaries.
• It aids property owners in their Medicaid planning and eligibility.
• The deed can shield a property from any Medicaid recovery.
• It offers federal tax benefits. Since Lady Bird deeds are incomplete gifts, they help the owner avoid gift tax. Also, the property receives a stepped-up basis upon the owner’s death, reducing potential capital gains taxes. Therefore, it’s a useful tool in property tax planning. 
• A Lady Bird deed typically maintains favorable status for properties used as primary residences. This homestead exemption includes tax breaks and creditor protections.
• Creating a Lady Bird deed is simpler and less expensive than setting up living trusts.

What are the disadvantages of a Lady Bird deed?

One of the challenges of utilizing such a deed lies in its limited availability. It is recognized only in five states: Florida, Texas, Michigan, Vermont, and West Virginia. This exclusivity means residents in other states must seek alternative estate planning methods. 

Furthermore, inheriting property through a Lady Bird deed may lead to potential increases in property taxes, particularly in states where ownership transfer prompts a reassessment of taxable value. 

How can you create a Lady Bird deed?

Creating a Lady Bird deed involves following specific rules depending on the state’s requirements. Unlike transfer-on-death deeds, these deeds rely on common law, not statutory authorization. 

The first step is to consult a real estate attorney specializing in estate planning or real estate law. They will help you navigate the legal complexities and ensure compliance with state regulations. 

The attorney will then draft the Lady Bird deed according to the grantor’s wishes, specifying the property, beneficiaries, and terms of transfer. Keep in mind that you need an accurate legal description of the property. And also specify how co-owners will hold title if applicable.

Be mindful to follow your state’s rules for font size, page format, indexing instructions, tax parcel numbers, etc.

Once drafted, the deed must be executed in accordance with state laws, often involving notarization and recording with the appropriate county office. 

How much does a Lady Bird deed creation process cost?

The total cost can vary depending on several factors such as the complexity of the deed, the state where the property is located, attorney fees, and document preparation services.

These fees can range from a few hundred to a few thousand dollars. Some individuals may opt to work with an attorney to ensure the deed is properly drafted and executed according to state laws, while others may choose to use online legal document preparation services at a lower cost.

Is there an alternative to Lady Bird deed?

If this deed isn’t available in your state, you can explore other options to avoid probate. One alternative is the transfer-on-death (TOD) deed, which is accepted in about 30 states. It’s often simpler and widely recognized compared to Lady Bird deeds. 

Last thoughts

If you want to skip probate for your property after you are gone, a Lady Bird deed might prove useful for you. It’s an easy and cheap way to transfer your property after you pass away. It can also help protect your home from Medicaid estate recovery.

FAQs

In which states are Lady Bird deeds recognized?

This deed is primarily recognized in states such as Florida, Texas, Michigan, Vermont, and West Virginia.

Do you pay taxes on a Lady Bird deed in Florida or Michigan?

Florida Lady Bird deed deed typically doesn’t trigger a reassessment for property tax purposes. Michigan too does not impose a transfer tax when property is transferred through a Lady Bird deed. However, property taxes may be affected, and it’s advisable to seek guidance from a legal expert.

How does a Lady Bird deed differ from a traditional life estate deed?

Unlike a traditional life estate deed, a Lady Bird deed allows the grantor to retain control over the property during their lifetime, including the ability to sell or mortgage the property without the consent of the beneficiaries.

Written by Ramona Sinha. March 30, 2025

Ramona is the Senior Content Writer for Kukun. This experienced blogger uses simple and succinct words to decipher the complex phenomenon called life. She has written articles covering a broad range of topics, such as real estate, lending and mortgage, finance, business, taxation, home designs, home improvement projects, decor concepts, and more. An avid traveler, she’s a digital nomad at heart and an animal lover from the depth of her soul.