Previously I wrote about the use of a lady bird deed, however, recently I was asked a specific question as to how the lady bird deed affects the spouses homestead rights.
Example: A party is married and they execute a lady bird deed to their children on their separate property which is their homestead.
The deed would not displace the spouse at death because the homestead right is attached to the separate property and community property. Therefore, while the children might now own the property, the spouse has the right to live in the house.
I found a very good article by Paul Premack that discusses this issue in detail. To check out this discussion, click on the box below.
A “Lady Bird Deed” is a nickname given to an Enhanced Life Estate Deed, which is used to convey property to your heirs outside of probate. This deed is commonly used in Texas because it allows the grantor to transfer property to beneficiaries while retaining a life estate in the property coupled with the power to sell, convey, or mortgage the property without the beneficiaries’ consent. The beneficiary of the deed does not get any rights to the property while the current owner is alive.
The Lady Bird Deed’s features include:
allowing the property owner to retain his homestead creditor and tax exemptions;
keeping the property owner’s home exempt from Medicaid claims during his lifetime;
allowing the property owner to pass the property to his heirs outside of probate upon death free of Medicaid claims and liens; and
allowing the property owner to live in the property, rent the property, or sell the property without the consent of the beneficiaries.
This deed is most helpful because a life estate is created and no trust is necessary. Instead of probating the owner’s estate, the beneficiary only has to file the death certificate in the local county records for the property to be transferred.
The main purposes of using a Lady Bird Deed is:
•avoid probate of the property
•keep the right to use and profit from the property for your lifetime
•keep the right to sell the property at any time
•avoid making a gift that might be subject to federal gift tax
•avoid jeopardizing your eligibility for Medicaid
•avoid the application of MERP
For a look at how this deed affects your living spouses homestead right, click HERE!