How a lady bird deed can help you avoid probate
An enhanced life estate deed which is sometimes called the Lady bird Deed is a method that you can use to transfer your real estate without probate. Once the owner of the deed passes away, the property can pass to the beneficiary you name in the deed via operation of the law, meaning it doesn’t invoke probation. The lady bird deed differs from the standard life estate deed because the property can be transferred at death.
This means that the life tenant’s owner can retain complete control over the properties while they are still alive. Therefore, the life tenant can decide to sell, mortgage, and even make a profit out of their property without consulting the beneficiary. You need to create a ladybird deed to avoid probate in Florida. This article discusses how a lady bird deed can help you to avoid probate.
A lady bird deed
A lady bird deed is a method that you can use to transfer real property to a beneficiary when you pass away. Sometimes called an enhanced life estate deed, a lady bird deed offers various benefits, making it a better option than a typical life estate deed. For a person who wants to maintain Medicaid eligibility and property rights while preventing a beneficiary from paying taxes, a lady bird deed can be the best option. The following are some of the benefits of creating a lady bird deed:
Avoid probate
Distributing your real property via a lady bird deed can help you to avoid probate. You should note that probate refers to the legal process that applies to the management of assets when you pass away. Probate makes sure that assets go to the proper beneficiaries and also ensures that taxes and debts involved in the process are fully paid.
A lady bird deed can help you to avoid probate because you name an inheritor that the asset is being transferred to. This is useful because it can allow the inheritor to avoid court charges related to probate and possibly allow you to avoid estate tax.
Retain property rights
A lady bird deed can also allow you to retain most of the property rights. In most cases, a typical life estate deed can make you lose out on many rights once you name an inheritor. For instance, you can still live on the property, but you cannot have the right to sell or mortgage the property. In some situations where the property’s value significantly decreases while you own it, you can sometimes be liable to your beneficiary.
A lady bird deed avoids these issues. Just like a typical life estate deed, you can keep on living on your property and retain several property rights. For instance, with a lady bird deed, you can have the right to sell the real property before you pass away and continue to make profits out of the property while you are still alive.
Avoid gift tax
Naming an inheritor with a lady bird deed can help you to avoid the gift tax. Once you give your property to someone, the giver of the gift is often responsible for paying taxes on the gift, but this is based on the value of the property. Remember that this only applies once the gift giver is still alive during the gift giving process.
A lady bird deed names beneficiaries before the death of the property owner, but retains the property’s ownership during their lifetime. The beneficiary can only receive ownership when the property owner dies. Because the exchange of the property occurs after the death of the original owner, the property received through a lady bird deed does not attract the gift tax.
Have Medicaid eligibility
A lady bird deed allows a property owner to have eligibility for Medicaid. When you apply for Medicaid, you need to report your assets to determine whether or not you are responsible for paying your medical care. The best way you can get around it is to give away your valuable assets to your family members. In this way, you can qualify for Medicaid while retaining your assets that you give away. To avoid this, a Medicaid applicant needs to disclose their assets they give away during a time called the look-back period.
A lady bird deed avoids this issue because the real property remains in the possession of the owner until their death. Therefore, a lady bird deed doesn’t require to be disclosed if you are applying for Medicaid. Some states may not consider the value of your assets when applying for Medicaid and a lady bird deed keeps you eligible for Medicaid.
You can avoid Medicaid repayment
A lady bird deed can also assist your family members to avoid Medicaid repayment. This is especially true in some situations when a person utilizes Medicaid. In such cases, a family member is usually liable to repay Medicaid expenses when they inherit the assets. But in some states, assets that failed to go through probate may not be applicable for the repayment process.
A lady bird deed prevents your beneficiaries from repaying Medicaid expenses because the assets did not go through probate. As explained earlier, a lady bird deed is often a simple way you can transfer real property while avoiding probate as well as preserving eligibility for Medicaid. This is suitable for a person who desires to retain property rights for the rest of their life without being a burden to their inheritors.
In conclusion, you should note that Medicaid eligibility cannot be affected by a lady bird deed because you still have ownership of the property. Also, the right to estate recovery can be reduced because in most cases, only the assets that are inherited through probate can qualify to repay Medicaid costs.
This means that the inheritors cannot risk when they decide to sell the assets to repay the expenses. Besides, you can also avoid the gift tax because the property is offered on death. As you can see, a lady bird deed brings many benefits, making it crucial for you to consider creating one.
