What Is an Enhanced Life Estate Deed?
Avoid probate with an enhanced life estate deed in these three states
An enhanced life estate deed is a special type of deed recognized by common law in three states: 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. The Florida lawyer who created the deed arbitrarily named it after President Johnson's wife.
What's Different About an Enhanced Deed?
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 that they're parties to the mortgage or sale. He effectively gives the property away—and unilateral control of the property—during his lifetime.
With an "enhanced" life estate, the owner of the real estate, referred to 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 his beneficiaries or the remaindermen named in the deed because he hasn't actually given the property to them yet. The property doesn't transfer until his death.
Beneficiary Deeds vs. Enhanced Life Estate Deeds
An enhanced life estate deed functions in a manner very similar to a beneficiary deed or transfer-on-death deed. Beneficiary and TOD deeds don't take effect and transfer property to the beneficiary until after death, and the language in the deed must specifically state this. These 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 it does not become part of the decedent's probate estate.
As of February 21, 2017, the following states recognize deeds "beneficiary deeds" or "transfer-on-death deeds" in their statutes:
- District of Columbia
- New Mexico
- North Dakota
- South Dakota
- West Virginia
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 on your eligibility. This means you cannot transfer ownership of property within five years of making the application. The extent of your eligibility depends on the value of assets you own at the time you apply. Less is more, and many people erroneously believe they can simply give property away before applying.
But transfers are subject to this five-year period. Assets given away during this time can be pulled back into the value of your estate.
Because an enhanced life estate deeds allows you to retain control over the property, it technically doesn't count as a transfer. This is not always the case with beneficiary deeds. It can depend on state law, however, so consult with a local lawyer if you're considering such a deed for this purpose.
Your 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 might 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