What are the advantages and disadvantages of lady bird deeds?

Lady Bird deeds, also known as enhanced life estate deeds, are a legal instrument used in estate planning to transfer ownership of real estate property to beneficiaries while the grantor retains the right to use and control the property during their lifetime. Here are some advantages and disadvantages of Lady Bird Deeds:

Advantages:

1. Avoidance of probate: One of the primary advantages of a Lady Bird deed is that it can help avoid probate, which can be lengthy and costly.

2. Retention of control: With a Lady Bird deed, the grantor retains control of the property during their lifetime, which means they can sell or mortgage the property without the beneficiaries' consent.

3. Flexibility: Lady Bird deeds are relatively flexible compared to other estate planning tools like trusts. The grantor can amend or revoke the deed as needed.

4. No gift tax: Transferring property through a Lady Bird deed is not considered a gift for tax purposes, which can be advantageous for individuals with large estates.

Disadvantages:

1. Potential Medicaid eligibility issues: A Lady Bird deed may impact the grantor's eligibility for Medicaid coverage for long-term care. It's essential to consult with an attorney to ensure that the Lady Bird deed will not impact the grantor's eligibility for Medicaid.

2. Tax implications: Depending on the value of the property and the specific laws in your state, tax implications may be associated with using a Lady Bird deed. Consult with a financial advisor to determine potential tax consequences.

3. Loss of control: Once the property is transferred through a Lady Bird deed, the grantor cannot change their mind and revoke it. The property will pass to the beneficiaries outside of the probate process.

4. Legal challenges: If the Lady Bird deed is not properly executed, it may be subject to legal challenges, which can be time-consuming and costly.

Overall, Lady Bird deeds can be a helpful estate planning tool, but it's essential to carefully consider the advantages and disadvantages before deciding to use this legal instrument. Working with a qualified attorney is important to ensure that a Lady Bird deed is right for your specific circumstances.