One of the key processes Florida property owners need to follow is that of effective estate planning. After all, your home—or portfolio of properties—is among the most significant investments you’ll have made throughout your life. It’s only natural that you want to pass this on to the most important people in your life.
Unfortunately, without solid estate planning, transferring real estate can be more difficult, expensive, and stressful than it really needs to be. Two of the tools that property owners tend to consider using here are Lady Bird Deeds and Transfer on Death (TOD) Deeds. While there’s some overlap in intentions, these are different items with distinct positions in Florida real estate law. Let’s take a closer look at them.
What Is a Lady Bird Deed?
A Lady Bird Deed—often also called an Enhanced Life Estate Deed—is a legal tool that is designed to make transferring real estate simple. In essence, it establishes that the property owner will retain full control over the property during the course of their life, while also assigning a named beneficiary who will automatically take ownership of the property when the current owner dies.
This is distinct from another common estate planning tool, the life estate deed. In those instances, the owner gives up control once the deed is signed. Lady Bird Deeds assign beneficiaries while retaining broad rights over the property, including:
- The right to sell the property
- The right to mortgage the property
- The right to revoke the deed without the beneficiary’s consent
Importantly, the beneficiary has no legal rights to the property until the owner passes away. The efficiency and flexibility of this approach has made it common in Florida estate planning.
What Is a Transfer on Death (TOD) Deed?
From a legal perspective, a Transfer on Death (TOD) Deed is often referred to as a beneficiary deed. It works in a relatively similar way to Lady Bird Deeds. Effectively, they also allow the owner to retain control over the property during their lifetime, at which time it is transferred to the named beneficiary.
There are some subtle differences, though, in that the TOD tends to provide fewer protections for the property owner in comparison to a Lady Bird Deed. For instance, Lady Bird Deeds can ensure exclusion from Medicaid recovery efforts and is revocable, whereas TOD deeds don’t usually offer either of these protections.
Most importantly for Florida real estate owners, though, is that a TOD deed is not recognized under Florida law. Despite the fact that TOD deeds have grown in popularity and are available in more than 30 states, Florida is not among them.
Key Advantages of a Lady Bird Deed
| Advantage | Explanation |
|---|---|
| Avoids probate | The property ownership automatically transfers to the named beneficiary upon death of the current owner. This means that probate proceedings aren’t necessary. |
| Retains control | In contrast to other types of traditional life estates, Lady Bird Deeds allow owners to sell or mortgage the property, alongside changing or revoking named beneficiaries. |
| Medicaid planning benefits | Retention of ownership means that assigning a beneficiary does not count as a transfer of assets that could result in a medicaid eligibility penalty period. The property is also protected from medicaid estate recovery. |
| Homestead rights preservation | Lady Bird Deeds don’t compromise Florida’s homestead protections that shield the property from many creditors and ensure lower property taxes. |
Limitations of a Lady Bird Deed
| Limitation | Explanation |
|---|---|
| Only applies to real estate | Lady Bird Deeds can only be applied to real estate in Florida, and cannot relate to other types of assets. For instance, they can’t transfer bank accounts, vehicle titles, or business investments. |
| Must be formally executed | Lady Bird Deeds must be correctly drafted and recorded in alignment with Florida real estate law. Typically, this includes recording in the county where the property is located, regardless of where the owner or beneficiaries live. |
| Multiple beneficiaries can lead to disputes | Some owners choose to name multiple beneficiaries. However, this must be carefully structured to ensure clarity on who is the primary beneficiary and the order of succession if the property can’t be transferred to the primary. Otherwise, disputes and complications tend to arise. |
Alternatives in Florida
Although TOD deeds are not applicable in Florida, there are alternative approaches to Lady Bird Deeds available that also minimize the need for formal probate. Some of the key examples of these include:
- Revocable Living Trusts – This involves setting up a trust which can hold real estate or other assets. The trust can be transferred to beneficiaries upon death, distributing property in a flexible way.
- Joint Ownership with Rights of Survivorship – This involves making a beneficiary the co-owner of the property, ensuring the surviving co-owner eventually inherits the property. However, this means the current owner loses full control.
- Tenancy by the Entirety – This is typically used by married couples. In essence, it passes property ownership automatically to the surviving spouse.
Each of these approaches has benefits, drawbacks, and conditions. Consulting with an experienced attorney is essential for finding a tool that aligns with your specific needs.
Risks of DIY Lady Bird Deeds
Technically speaking, property owners can independently create and record Lady Bird Deeds. However, it’s important to recognize that these are quite complex legal documents. It is common for people to download out-of-state templates or even purchase a Transfer of Death Deed document from a generic form provider, neither of which is likely to be relevant for use in Florida. This can leave the property subject to probate and ownership disputes upon the death of the current owner.
Another risk of a DIY approach to Lady Bird Deeds is in the failure to record the deed correctly. Owners may file their deeds in the incorrect country or even fail to record them at all, feeling that completion of the paperwork is enough on its own. This can lead to intended beneficiaries facing legal disputes and even leaving the property vulnerable to Medicaid recovery.
The key takeaway for property owners should be that, while there are great tools for transferring property without probate, it is vital to make the right decisions. An experienced real estate lawyer can help you to establish the most effective approach for your needs, and guide you through drafting, recording, and maintaining it effectively.
