The Lady Bird Deed is named after Lady Bird Johnson, the wife of President Lyndon B. Johnson. The name was popularized because of Lady Bird Johnson's advocacy and efforts in promoting property rights and estate planning during her time. The deed itself was not directly created by or specifically for her, but her association with property and legal reforms contributed to the widespread adoption and recognition of this estate planning tool.
A Lady Bird Deed, also known as an Enhanced Life Estate Deed, is a legal document used to transfer real estate upon death while retaining control and benefits during the grantor's lifetime. Here’s how it works:
- Ownership Retained: The grantor retains full control of the property, including the right to sell, mortgage, or change the deed.
- Automatic Transfer: Upon the grantor’s death, the property automatically transfers to the named beneficiaries without going through probate.
- Tax Benefits: It can help avoid capital gains taxes for beneficiaries because the property receives a stepped-up basis.
- Medicaid Planning: It may help protect the property from Medicaid estate recovery if used for long-term care planning.
In essence, it’s a way to keep control of your property while ensuring it passes smoothly to your heirs.
What is the difference between a trust and a Lady Bird Deed?
A Lady Bird Deed and a trust serve different purposes and have distinct features, so one cannot fully replace the other. Here’s a comparison to help you understand their roles:
Lady Bird Deed
- Purpose: Primarily used to transfer real estate upon death while allowing the grantor to retain control during their lifetime.
- Control: The grantor retains full control over the property and can sell, mortgage, or change the beneficiaries.
- Probate: Avoids probate for the property listed in the deed.
- Medicaid Planning: Can help protect property from Medicaid estate recovery.
- Scope: Only applies to real estate; other assets are not covered.
Trust
- Purpose: A comprehensive estate planning tool used to manage and distribute a variety of assets, including real estate, financial accounts, and personal property.
- Control: The grantor can set specific terms for how and when assets are distributed, and may appoint a trustee to manage the trust.
- Probate: Assets in a trust avoid probate, making the distribution process smoother and potentially quicker.
- Flexibility: Offers broader flexibility and can be used to address complex family dynamics, tax planning, and more.
- Scope: Can cover all types of assets and can include specific instructions for asset management and distribution.
Summary
- Lady Bird Deed: Best for transferring real estate with the advantage of retaining control during life and avoiding probate for that property.
- Trust: Provides a more comprehensive approach to managing and distributing various assets, addressing a wider range of estate planning needs.
Depending on your estate planning goals, you might use a Lady Bird Deed for real estate and a trust for other assets, or choose one based on your specific needs. Consulting with an estate planning attorney can help determine the best strategy for your situation.
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