Lady Bird Deed vs Revocable Living Trust
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- Опубликовано: 14 мар 2020
- Attorney Jason Neufeld discusses the differences between Lady Bird Deeds and Revocable Living Trusts. Learn more about Lady Bird Deeds👇
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Transcript:
We often get the question, is it better to utilize a ladybird deed, or a revocable living trust when figuring out how to dispose of my real estate after I pass away? And it's a really good question. The simple answer is a revocable living trust is going to give you more options and more flexibility. Let me explain why.
With a ladybird deed, essentially, you're saying, I am deeding this property to myself, and I can rent it, I can sell it, do whatever I want. But if I don't do any of those things, then here are the people who should inherit my property after I pass away. That could be one or more typically children, but it really could be anybody. And the only problem with that is what happens if one of those people predecease you. Right? So you pass away and you haven't made a change to your ladybird deed, you now have a portion of your real estate that is supposed to go to someone who is now deceased. And now that person's estate has to be opened up to figure out what to do with their portion of the real estate.
So while we don't often like to think about things like that happening, and we think that, you know, we're going to outlive our kids, sometimes that doesn't happen and can cause confusion and you create the ladybird deed in the first place to try to avoid a probate. But if things don't go as planned, a probate might be needed anyway. That's the reason why instead of utilizing a ladybird deed or enhanced life estate deed, to dispose of your real estate, sometimes it makes more sense to utilize a revocable living trust as well, because the Living Trust is an infinitely malleable and flexible document meaning we can provide for multiple contingencies and so you can ensure that a probate will always be avoided, and it can provide for what happened should things change.
It's also a little bit easier to amend right? If you record a ladybird deed, you retain the right to make changes to it, but it involves recording a new deed, essentially, because you have to put the world on notice of what these changes are. Whereas for a revocable living trust, you can go to a lawyer who will do a one-page trust amendment to make the changes that you want. So I say usually, for a revocable living trust makes more sense, especially when you're utilizing more than one piece of real estate, right? You have your homestead, and you have vacation homes or rental properties, then being able to deed all of them into one revocable living trust makes a lot more sense than utilizing individual ladybird deeds for all these multiple properties.
So that's to give you some things to think about ladybird deeds are certainly a very useful estate planning tool. We do them all the time. But sometimes it makes more sense, especially if we're doing general estate planning in the first place. We're already using a revocable living trust for general estate planning purposes, and probate avoidance purposes. If there's a lot of real estate or one or more pieces of real estate involved. We'll say don't worry about the ladybird deed, let's just utilize the revocable trust instead. Hope that answers the question. Thank you very much.
You still need to properly change your house deed to the name of the trust if you create a Living revocable trust. If not the house will go through probate. If you don’t fund the trust by changing your bank accounts, brokerage accounts, CDs, etc, to the name of the trust, it goes to the named beneficiary if you remember to name them and you must change them if they predecease you.
Exactly correct! When we draft a revocable trust, we would certainly create a deed as well to get the property into the trust. We also assist our clients with getting financial assets into the trust as well.
You are right though, forgetting to do any of the above can result in a probate.
Very informative
thank you so much!
There’s a cost difference between the 2. The lawyer will then go through a list of other documents needed, like a will for you to complete.
This is true. We will review the differences, answer questions regarding both, and allow you the client to make the final decision.
Wouldn't an Enhanced Life Estate Deed with the beneficiaries being stated as "joint tenants with rights of survivorship" be effective even if one of the beneficiaries predeceases the grantor?
It depends on your goals. The revocable living trust is just going to provide more security for more unpredictable situations: for example, if one of the remaining joint tenants passes away, and that deceased child has their own children, using JTWROS can then unintentionally disinherit that familial line.
In addition, any remaining co-owners after the original owner passes away, are now business partners. Meaning they all have to agree for anything to happen. Using a revocable trust avoids this.
That being said, I really am not anti-ladybird deed, our office utilizes them frequently. But I always want to make sure my clients understand the pros and cons of all Florida estate planning strategies.
Does every property in different states need an independent Trust?
Hi Ron - sometimes. You could create one trust and deed the different properties (in different states) to title them in the name of the same trust.
Sometimes, you might use an LLC or individual trusts for each property for asset protection purposes.
If one of the two on Lady Bird predeceases, wouldn't the property simply go to the one still alive?
It depends on how the deed reads. If the beneficiaries are tenants-in-common, you're back in probate court....if hey are joint-tenants with rights of survivorship, then the survivor will get the property. BUT, that also may frustrate your estate planning goals. For example, if you have two children, and they each have two children (you have four grandchildren), you now may have unwittingly disinherited two of your grandchildren.
Here is where I believe a Lady Bird Deed is a good choice over a Revocable Living Trust. You have no special circumstances that warrants a Trust other than a house(in Florida). You want to leave your house equally to your children. A Will plus a Lady Bird Deed saves you about $1,000 over a Revocable Living Trust. The only thing you must remember is to make a new Lady Bird Deed if your beneficiary situation changes. You do not need the cost of a lawyer to make a new Lady Bird Deed, where you do need a lawyer to update your Trust regardless of how minor the change required.
I agree with you completely. The trust is a more expensive device and, if all goes according to plan, might be no more effective than a lady bird deed.
But the revocable trust as some built in "safety features" in case life does not go according to plan or the owner forgets to change the beneficiary.
So, I inherited from a recovable trust three pieces of property. Does that mean I use the lady bird deed to put them in my name?
Hi there - if you inherited the properties you would usually use a Warranty or Quit Claim Trustee's Deed to get the property clearly in your name. The lady bird deed is only useful for you to get the property to the next generation when you pass. We would need to take a look. if you are in Florida, please call and set up a consultation (you can also email: scheduling@elderneedslaw.com)
Lady bird I am They took me and my two sisters
If you'd like to rephrase the question about lady bird deeds or revocable living trusts (in Florida), we'd be happy to reply.
What’s the big problem with going through probate? Just the wait or the costs? I’d like to get some actual answers based on my personal situation too but I imagine that’s best handled by a professional from my state? Thing is one lawyer isn’t exactly as good as another... I know because 30 years ago I had an attorney in a small criminal matter and I had to tell him what just happened in court that will get the case dismissed... it all just went over his head... they aren’t all the same or even close. 😳
I agree, not all probate or estate planning lawyers are going to provide the same level of service. Probate is not inherently "evil" - your concerns are exactly correct: probate can be needlessly time-consuming and expensive.
I believe I know the answer, but: Can a mobile home that is titled and on a rented lot be covered in a Ladybird deed? I believe NO.... Because it is personal property and not real estate (real property). Says right in the word 'deed'.
I believe the situation is fact-specific. Check out: floridarevenue.com/Forms_library/current/gt800047.pdf.
I think the bottom line will come down to: does it have its own parcel ID with the tax appraiser's office.
Can't you just demand that each beneficiary of your lady bird deed have their own revocable trusts and name their trust as beneficiaries?
Trusts can indeed be named as remainderman in a lady bird deed.
Why don't you drop the "800 pound Gorilla" shoe, in the room, and stop trying to just drum up business. The Revocable living trust leaves you hung out to dry for Medicaid recovery, whereas a Ladybird deed does not.
Hi Carrol - in Florida, only assets that go through probate are subject to Medicaid estate recovery. You are correct in that there is a chance that creditors such as Medicaid can go after assets in a revocable trust. However, this seems to rarely happen. We do plenty of lady bird deed's, so I am absolutely not against them. But, if life doesn't go according to plan, a lady bird deed is much more likely to wind up in probate, while a revocable trust can provide for multiple contingencies. I hope this helps and thank you for your thoughtful comment.
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