Ladybird Deed Texas
You can use a Ladybird Deed or enhanced life estate deed to transfer a remainder interest to beneficiaries without the necessity of probate. What makes it different from other deeds is that the property owner retains the right to occupy and use the property (life estate) whichever way they want during the property owner’s lifetime. In other words, the property owner can sell, mortgage, lease, or change the remainder beneficiaries at any time without having to consult the beneficiaries. The property passes to the remainder beneficiaries if the property owner dies without revoking the deed.
What Are The Benefits Of A Ladybird Deed
An advantage already mentioned above is the fact that the property owner retains all the rights on the property and can do whatever they want with the property. A traditional estate deed gives the remainder beneficiaries some powers over the property. For example, with a traditional estate deed the property owner has to consult the remainder beneficiaries before selling or leasing out the property.
Another benefit is that a ladybird deed protects the property from the creditors of the remainder beneficiaries during the lifetime of the property owner. The property owner also doesn’t have to file a gift tax return or pay any gift tax on the transfer. This is because the law still treats the property owner as still owning the property until death. But the greatest benefit is that the property owner does not lose eligibility for Medicaid because the property owner retains the right to sell the property or revoke the deed.
Ladybird Deed And Probate Process
The Ladybird Deed makes it easier for the property to pass to remainder beneficiaries because it allows for nonprobate transfer. Since it passes out of probate the remainder beneficiaries do not have to worry about going to court for a Will to be proven. The beneficiaries named in the Ladybird Deed get the property immediately the life tenant or the property owner dies regardless of what the Will says.
Revoking the Lady Bird Deed
A Lady Bird Deed can be revoked by the grantor either by filing a revocation document or by filing a subsequent conflicting Lady Bird Deed. Another way for the grantor to revoke the deed is by selling, gifting, or transferring the property during the grantor’s lifetime. However, if the grantor dies without revoking the LBD, the remainderman can file an affidavit to notify that the grantor is dead and that the remainderman has full ownership of the property.
Lenders Using The Due-On-Sale Clause
In case you are a remainder beneficiary of a mortgaged property, there is a chance that the mortgage company may tell you that the conveyance may have triggered the mortgage’s due-on-sale clause. A due-on-sale clause is used by the lender to declare that the entire balance is due immediately when the ownership of a property is changed. But the law prohibits lenders from using this clause when someone inherits property. An experienced attorney can help you if a lender uses a due-on-sale clause for a property you are supposed to inherit.