Before you develop an estate plan with your estate and probate lawyer, there are lots of things to consider. Chief among them is how you want to handle the transfer of your assets, including your home.
Because estate plans, in our opinion, are not “one size fits all,” and there are a number of strategies that can be used to achieve the outcome that suits you and your needs the best.
Which brings up the question, should you use a Lady Bird Deed or a Revocable Living Trust (“trust”) to transfer your home?
As always, the answer depends on your goals and particular situation. Which is why working with an experienced estate and probate lawyer will help you achieve your goals and can give you peace of mind, knowing your wishes will be followed and your loved ones are taken care of when you are gone.
So, let’s look at some of the differences between a Lady Bird Deed and a trust. Then, in consultation with your estate lawyer, you decide which one is best for you.
What is a Lady Bird Deed and What Can it Do?
A Lady Bird deed —also known in Florida as an enhanced life estate deed—is a legal document that allows an individual to create a life estate in real property and then transfer that property to his or her heirs at the time of death.
Where one is allowed to use a Lady Bird Deed (like Florida, Michigan, Texas, Vermont, and West Virginia) they can be very helpful in avoiding probate. A Lady Bird Deed allows the property owner to use and control the property during his lifetime, then, at the owner’s death, automatically transfers the property to the beneficiaries named in the deed—all without the need for probate.
Probate, as we have noted before, is the legal process by which a court distributes a decedent’s assets. If you die intestate (without a Last Will and Testament (“Will”), or die owning property that does not pass outright to a named beneficiary upon your death, those assets must go through the time-consuming and expensive process of probate. So avoiding probate is a good thing.
In Florida, a Lady Bird Deed can be a simple and cost-effective way to transfer a homestead without having to give up any of the homestead protections. It must, however, be drafted properly.
Although a Lady Bird Deed creates a life estate in the property owner, don’t confuse it with a deed that creates an ordinary life estate interest.
Unlike an ordinary life estate deed, the beneficiaries or remaindermen under a Lady Bird Deed have no vested interest in the property during the owner’s lifetime. The property owner under a Lady Bird Deed can decide at any time to deed the property back to himself/herself. In other words, a Lady Bird Deed is revocable.
Also, the property owner can freely change the beneficiaries at any time prior to his/her death. Finally, in Florida, the property owner has no duty to maintain the real property for the beneficiaries as he does under an ordinary life estate deed.
How Does a Lady Bird Deed Compare to a Revocable Living Trust?
Like anything, the Lady Bird Deed has its advantages and disadvantages.
Briefly, some of the advantages of a Lady Bird Deed are:
- It avoids probate
- It generally allows you to keep your homestead protections
- It is low cost
- It is revocable (so you can change your mind and deed the property back to yourself)
While the Lady Bird Deed has its specific advantages, there are other estate planning tools —for example, the Revocable Living Trust (“trust”) —that may be just as helpful.
In short, a trust is a legal agreement that the “settlor” (i.e., person or persons making the trust) creates to manage his/her assets during his lifetime, and then have those assets distributed at his death. (Trusts are far more complicated than this short statement, so please always consult with an experienced estate lawyer to learn more.)
Trusts are flexible estate planning tools.
Like a Lady Bird Deed, a trust avoids probate. Unlike a Lady Bird Deed, however, the assets that can be in a trust are more than just the family home. So, for those who have extensive assets or want to protect more than just the family home, a trust can be a good estate planning tool to use.
Trusts can also be written so as to provide protection against creditors for the named beneficiaries of the trust (other than the settlor, that is).
On the other hand, moving a homestead to a trust may cause you to lose your homestead protections. Clearly, this is something you should discuss with your estate attorney.
Which One is Better for You? A Lady Bird Deed or a Trust?
Everyone’s situation is unique. Further, estate planning can make use of trusts and Lady Bird Deeds where appropriate.
Therefore, deciding whether a Lady Bird Deed or trust (or both) will work for you is something only you and your estate planning attorney can decide.
Customized Estate Plans that Meet Your Needs
At the Law Offices of Samantha J. Fitzgerald, you get more than just an estate plan: you get peace of mind. We work hard to ensure that your wishes will be followed, and your loved ones are taken care of when you are gone. Connect with us on Facebook or Instagram or email us at: [email protected] today.