A Ladybird deed (also referred to as an Enhanced Life Estate) is a unique method of transferring real property via a warranty deed or a quitclaim deed to a contingent grantee that reserves a life estate, and the lifetime power to convey the property and unilaterally overcome the contingent grantee’s interest.
More specifically, the language contained within the Ladybird deed allows the grantor the ability to transfer property upon the grantor’s death to a named beneficiary; however, during your lifetime, you retain control of your property. Meaning, that you can still sell, mortgage or otherwise convey any interest in your property at any time. But if you choose to do so, the named beneficiary will not receive any interest in your property after your death.
Utilizing a Ladybird deed might be an ideal option if your only major asset is your home or if you are unmarried. It can be a cost-effective tool for estate planning as it can help avoid the probate process and is significantly less expensive than a living trust. A Ladybird deed can also be used to transfer real estate to the trust of the settlor.
Moreover, a Ladybird deed does not require the name of the beneficiary be added to your deed to make him or her a joint owner. When listed as a joint owner, you have a present ownership interest in the property. This puts the property at risk to potential creditors of the joint owner. However, with a Ladybird deed, the ownership interest of the named beneficiary will only take effect after your passing. Therefore, protecting the property from any creditors of the named beneficiary until the grantor’s death.
Finally, execution of a Ladybird deed is not considered a gift subject to federal gift tax, or a divestment subject to penalty for Medicaid eligibility purposes.
Despite the flexibility and advantages of a Ladybird deed, it is important to assess whether this conveyance document fits your particular needs and would be the most beneficial option for the property.
Samantha M. McLeod | Associate Attorney
KALTZ Coulombe PLLC