Lady Bird Deed Florida

Elder Law
July 16, 2019

Lady Bird Deed is also known as a “transfer on death deed.” Lady Bird Deeds are also known as “Enhanced Life Estate Deeds.” All three terms refer to the same type deed. It is important to note that Lady Bird Deeds are not utilized nationwide. However, they are specifically used regularly in Florida.

The basic idea is that the Lady Bird Deed in Florida allows property to pass outside of probate after the initial owner passes away. It also provides the initial owner (that we’ll call the life estate holder or life tenant) can (a) change their mind as to who should receive the property before their passing and (b) do whatever they want with their property without having to consult or get the permission of the listed remainderman, even if it means eliminating their eventual ownership interest.

Importantly, the remainderman has a vested interest (subject to being divested). So, if the remainderman predeceases the life tenant holder,then upon the life-estate holders’ death, the deceased’s remainderman’s portion of the property should go to their estate.

In other words, if there were two remainderman that were to inherit 50%/50% upon the life estate holder’s death; should one remainderman pass away first, the surviving remainderman still only gets his/her 50%. The other 50% would have to go through probate.

Lady Bird Deed vs. Traditional Life Estate Deed

Quickly, I want to explain the main difference between an Enhanced Life Estate Deed and a Regular or Traditional Life Estate Deed: In a regular / non-lady-bird deed, you’ll find language that essentially says:

“Sam Jones for his life, with remainder to his daughter Lisa Jones.” In this example, Sam is the life-estate holder (a.k.a. life tenant) and Lisa is the remainderman.”

Because this is a traditional life estate deed (and not an enhanced life estate deed, or lady bird deed), Sam would be unable to sell his property, or take out a mortgage, without joinder by Lisa (i.e. Lisa has to sign and agree to do these things involving Sam’s property).

By contrast, an enhanced life estate deed says that the life tenant has full power and authority to mortgage, rent, sell, etc… without joinder of the remainderman. This is assuming that the Florida lady bird deed has been properly drafted to state(1) what powers the life tenant has (e.g. convey, mortgage, rent, etc..) and (2) must also include words to the effect of: “the life tenant has full power and authority to do X, Y, and Z in fee simple without joinder of the remainderman.”

How an Enhanced Life Estate Tenant Makes a Conveyance or takes a Mortgage in a Lady Bird Deed

The Florida legislature has not had much to say about lady bird deeds. However, three new Florida Uniform Title Standards were published by the Real Property, Probate and Trust Law Section of the Florida Bar in June 2019. They passed these standards that address, and provide direction, on enhanced life estate deeds.

When a Lady Bird Deed Life Tenant Wants to Convey or Mortgage their Property

The Florida Uniform Title Standard 6.10 and 6.11 states that the holder of life estate in non-homestead or homestead property, if the ladybird deed specifies that they have the power to sell, convey, mortgage and otherwise manage fee-simple estate MAY convey or encumber/mortgage the fee simple estate during the lifetime of the holder of the life estate without joinder by the remainderman.

In a homestead situation, if the life estate holder is married, then the spouse must sign all documents (but still not the remainderman) if life estate holder wishes to sell or mortgage.

If doing a quit-claim deed, the grantor should specifically state it is a fee simple conveyance by the life tenant (because otherwise it would be ambiguous, i.e. only conveying their present interest -without clarification- could be interpreted as the life estate holder only transferring or encumbering their life estate…. unlike with a warranty deed.

How Are Judgments and Liens Handled with Lady Bird Deeds in Florida

What if an enhanced life estate deed holder has a creditor with a lien or judgement?

If the lien or judgment attached to the property, a title insurance company would require proof of a release or satisfaction of judgment vis-a-vis the life estate holder in order for the life estate holder to transfer title in fee simple during his or her life.

However, if the life tenant died without making a conveyance, and the creditor failed to levy or execute on their judgement, no release or satisfaction of lien would be necessary. The remainderman would inherit the property subject to the lady bird deed free and clear of the unpaid debt.See Aetna Ins. Co. v. La Gasse, 223 So. 2d 727 (Fla. 1969); and Ogelsby v. Lee, 73 So. 840 (Fla. 1917). F.S. 733.706 and 733.702(4)(a).

What if there are judgments or liens against remainderman listed on a ladybird deed?

The life tenant of a lady bird deed may convey or mortgage the fee simple title regardless of any judgments against the remainderman. This is because the remainderman’s interest can be divested by the life estate holder at any time. So, the remainderman’s debts/creditors would not impede the transfer or encumbrance wishes of the life estate holder.

An exception to this rule may be a federal IRS tax lien. Most title companies will treat IRS liens, even if only pertaining to the remianderman, differently.

How the enhanced life estate deed life tenant should substitute remainderman

In the first lady bird deed recorded, the Florida elder law attorney should specifically state that the life tenant retains right to divest or change remainderman. Then if a subsequent deed is recorded effectuating a change in remainderman, adding remainderman, or removing remainderman from the enhanced life estate deed, it would be clear that this would not be a problem.

If the enhanced life estate deed does not specifically mention this right, some title insurance companies might have an issue.  As a result, appropriate language should be included in the first enhanced life estate deed that is recorded.

Then, if the life estate holder wishes to change remianderman,he or she can record a second lady bird deed, deeding the property to themselves with a new remainderman, or to themselves in fee simple, or to a third party.

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Do I need a Lady Bird Deed To Qualify For Florida Medicaid?