Enhanced Life Estate deed a.k.a. Lady Bird Deed

Even though probate is Texas is a straight forward process, many people still prefer to avoid it if possible.  There are several things that you can do to avoid probate after death.  Designating beneficiaries for your bank accounts or retirement fund accounts is top on the list.  But what about real property? Can you designate a beneficiary for your home?  Well, sort of.

Texas common laws have long recognized the concept of enhanced life estate deed, nicknamed “Lady Bird deed”, that allows the transfer of real property upon the death of the grantor.  Having a nickname like this, many people mistakenly believe that President Lyndon B. Johnson had used it to transfer a piece of real property to his wife Lady Bird Johnson upon his death.  In fact, the name came about after Florida attorney Jerome Solkoff used a character named Lady Bird in a fictitious case in his law school teaching material to illustrate the value of an enhanced life estate deed in the transfer of real property.

A life estate is the right to live in the property while the person is alive.  A regular life estate deed allows the grantor to live in the property while he is alive, and the property is transferred to the grantee upon the death of the grantor without having to go through probate.  But if the grantor wants to sell the house later on, he will have to get the consent of the grantee.  An enhanced life estate deed, or a Lady Bird deed, gives the grantor an additional power to sell or dispose of the property during his life time without the consent of the grantee. For example, John transfer his home to Mary under an enhanced life estate deed, such that Mary will become the new owner of the house upon John‘s death. John continues to live in the house.  Two years later, John decides to sell his house.  He may do so without having to notify Mary at all.  When John dies, Mary will not inherit any interest on the house from John since John does not own the house anymore.

An enhanced life estate deed is commonly used in Medicaid planning because it removes the real property from probate, shielding the real property from being used to satisfy any claims by Medicaid under the Medicaid Estate Recovery Program upon the death of the grantor.

To learn whether an enhanced life estate deed should be incorporated into your estate plan, please discuss with our office.