Is a Trust Better Than a Lady Bird Deed?

In Florida, both trusts and Lady Bird deeds (enhanced life estate deeds) are common tools used for estate planning, but they serve different purposes and have distinct advantages and disadvantages. Here's a comparison to help determine which might be better for your needs:

Lady Bird Deed

A Lady Bird deed is a cost-effective and straightforward tool primarily used to transfer real estate directly to beneficiaries upon the owner’s death, thereby avoiding probate. It allows the property owner to retain full control of the property during their lifetime, including the ability to sell or mortgage it without the beneficiaries’ consent. Additionally, it offers protection from Medicaid estate recovery, making it an attractive option for those concerned about preserving their home from being used to repay Medicaid benefits.

Trust

A trust offers a more comprehensive estate planning solution, providing significant flexibility and control over a wide range of assets, not just real estate. It allows for detailed terms regarding the distribution of assets, avoids probate, and maintains privacy since trust terms do not become public records. Trusts can also provide favorable tax treatment, such as a stepped-up basis for beneficiaries, potentially reducing capital gains taxes. However, setting up and maintaining a trust is more complex and expensive than a Lady Bird deed, requiring ongoing administration and proper funding to ensure all intended assets are included.

Which is Better?

Consider a Lady Bird Deed if:

• Your primary concern is to transfer real estate outside of probate simply and cost-effectively.

• You want to retain full control over your property during your lifetime.

• Medicaid estate recovery is a concern, and you want to protect your home from being used to repay benefits.

Consider a Trust if:

• You have multiple types of assets that you want to manage and distribute.

• You desire detailed control over the timing and conditions of asset distribution to beneficiaries.

• Privacy is a concern, and you prefer the terms of your estate plan to remain private.

• You want to minimize estate taxes and provide tax benefits to your beneficiaries.

A trust may be better if you have diverse assets and require detailed control over their distribution despite the higher complexity and cost. However, if your primary goal is to manage real estate transfer efficiently while retaining control during your lifetime, a Lady Bird deed might be more suitable.

Involving a real estate attorney in your estate planning decisions, especially when considering options like trusts and Lady Bird deeds, is one of the most important decisions a property owner can make. A real estate attorney can provide guidance tailored to your situation, ensuring that all legal requirements are met and that the chosen strategy aligns with your overall estate planning goals.

Attorneys can help you navigate complex legal nuances, protect assets from potential risks, and optimize tax benefits. Their expertise can minimize the likelihood of future disputes and ensure a smooth transition of your assets to your beneficiaries.