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Lady Bird Deed: Understanding the Pros & Cons

Updated: May 30

Pros of a Lady Bird Deed:

Probate Avoidance: One of the main advantages of a Lady Bird Deed is that it allows the property to bypass the probate process. This means that upon the owner's passing, the property will automatically transfer to the designated beneficiaries without the need for court involvement, saving time and money.

Retained Control: Unlike other methods of property transfer, a Lady Bird Deed allows the owner to retain full control and ownership rights during their lifetime. They can sell, mortgage, or even revoke the deed if desired, without seeking consent from the beneficiaries.

Medicaid Planning: A Lady Bird Deed can be a useful tool for Medicaid planning. By transferring the property through a Lady Bird Deed, the property is not considered a countable asset for Medicaid eligibility purposes, potentially allowing the owner to qualify for long-term care benefits without losing their home.

Cons of a Lady Bird Deed:

Possible Tax Implications: While a Lady Bird Deed does offer some advantages, it is important to consult with a qualified tax professional to understand potential tax implications. Depending on the specific circumstances, there may be capital gains or gift tax considerations to take into account.

Limited Flexibility: Once a Lady Bird Deed is executed, it becomes relatively difficult to make changes or modify the terms. If circumstances change, such as the need to sell the property or alter the beneficiaries, it may require additional legal processes to accomplish these changes.

Estate Recovery: In some states, Medicaid may seek reimbursement for long-term care expenses from the property transferred through a Lady Bird Deed upon the owner's passing. It is crucial to understand the rules and regulations regarding Medicaid estate recovery in your jurisdiction.

A Lady Bird Deed can be a valuable tool in estate planning, offering benefits such as probate avoidance, retained control, and Medicaid planning advantages. However, it is essential to carefully consider the potential tax implications and limitations associated with this type of deed. Consulting with an experienced estate planning attorney is crucial to understand if a Lady Bird Deed aligns with your specific goals and circumstances. By doing so, you can make informed decisions and ensure your assets are protected and distributed according to your wishes.

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