Enhanced Life Estate Deed

What is an Enhanced Life Estate Deed?

Florida Enhanced Life Estate Deed.

An enhanced life estate deed is a special type of deed recognized by common law in Florida, Michigan and Texas. Also called a "Lady Bird" deed, it can be used to transfer ownership of real estate outside of probate to a beneficiary named in the deed. Its connection to the family of President Lyndon Johnson is that the Florida lawyer who created the deed arbitrarily named it after the President's wife.

 

Enhanced Life Estate Deeds 

With a "regular" life estate deed, the owner of the real estate makes a gift of the property to beneficiaries, called remaindermen. He can't mortgage or sell the property during his lifetime without the permission and "joinder" of the remaindermen -- joinder means they're parties to the mortgage or sale. He effectively gives the property away during his lifetime. 

With an "enhanced" life estate, the owner of the real estate -- referred to in legalese as the "life tenant" -- retains complete control over the property during his lifetime. He has the right to mortgage or sell the real estate without the consent of the beneficiaries or remaindermen named in the deed because he hasn't actually given the property to them yet. The property doesn't transfer until his death. 

An enhanced life estate deed or Lady Bird deed functions in a manner similar to a beneficiary deed or transfer-on-death deed in the states that recognize them.

 

Beneficiary Deeds

These deeds do not take effect and transfer the property to the beneficiary until after death, and the language in the deed must specifically state this. They must be prepared, signed and recorded in the county land records office just like any other deed. Because the property passes by deed, it does not require probate and does not become part of the decedent's probate estate.

 

As of January 1, 2016, the following states recognize deeds referred to as "beneficiary deeds" or "transfer-on-death deeds" in their statutes: 

  • Alaska
  • Arizona
  • Arkansas
  • California 
  • Colorado
  • District of Columbia
  • Hawaii
  • Illinois
  • Indiana
  • Kansas
  • Minnesota
  • Missouri
  • Montana
  • Nebraska
  • Nevada
  • New Mexico
  • North Dakota
  • Ohio
  • Oklahoma
  • Oregon
  • South Dakota
  • Texas
  • Virginia
  • Washington
  • West Virginia
  • Wisconsin
  • Wyoming 

Another Advantage of Enhanced Life Estate Deeds

Lady Bird deeds aren't just useful for avoiding probate. If a time should come when you require long-term care and you apply for Medicaid, the government will impose a five-year "look back" period. You cannot transfer ownership of property within five years of making the application. Because an enhanced life estate deeds allows you to retain control over the property, it technically doesn't count as a transfer. This can depend on state law, however, so if you're considering such a deed for this purpose, consult with a local lawyer.

The state typically cannot make a claim against the property for reimbursement of paid Medicaid benefits after your death, either, because the real estate does not become part of your probate estate. 

If you are considering using an enhanced life estate deed in Florida, Michigan or Texas to avoid probate, consider asking an estate planning attorney to draft the deed.

If you make a mistake, you may inadvertently create a "regular" life estate deed instead of an "enhanced" life estate deed.

NOTE: State laws change frequently and this information may not reflect the most recent changes in the laws. For current legal advice, please consult with an attorney. The information contained in this article is not legal advice and is not a substitute for legal advice.

Also Known As: Beneficiary Deed, Lady Bird Deed, Transfer on Death Deed, TOD Deed