Estate and Elder Law Planning Using Lady Bird Deeds – Part 4 Practical Applications

Estate and Elder Law Planning Using Lady Bird Deeds – Part 4 Practical Applications

Some of the typical Lady Bird Deed scenarios include a husband and wife retaining a life estate, with the remainder to children upon their death. The remaindermen can be tenants in common or joint tenants with right of survivorship. If there are several remaindermen and the mechanics of working with such a large family or fear of a judgment against one of the possible remaindermen is an issue, a revocable trust can be established by one of the remainderman who also acts as trustee. The remainderman in that scenario would be “John Jones, as trustee of The John Jones Revocable Trust.”  The beneficiaries of the trust would be all of the children. At the death of the life tenant, the trustee would be empowered to sell the property without joinder of the other beneficiaries and distribute the proceeds out of the trust, pursuant to the terms of the trust. If one of the beneficiaries has a recorded judgment against him or her in the county where the property is located, the judgment will not become a lien on the property since the beneficiary was not the remaindermen. The judgment debtor can then negotiate with the creditor prior to distribution of his or her share of the proceeds. Query, will the result be the same if a Federal Tax Lien is involved?

Using a Lady Bird Deed as a testamentary substitute is also possible as long as the remainderman is ascertainable from the four corners of the deed. For example, a Lady Bird Deed that reads, “remainder to my son John Smith, if he survives, and if not, to my daughter, Mary Smith,” acts as a testamentary substitute and should be allowed, since the recording of a death certificate for John Smith is sufficient to vest title in Mary Smith, who is already described in the deed.  On the other hand, using the language, “to my son John Smith, per stirpes,” should not be sufficient to pass title without probate proceedings for John Smith. A determination as to the actual takers can not be determined from a reading of the document, but only through probate proceedings. Also, since the term “per stirpes” is a probate term, it would probably be ignored since a deed is not executed with the formalities of a will. The result should be the same, requiring a probate proceeding for John Smith to determine his heirs.

For more help with Lady Bird Deeds or Elder Law planning call our Miami office at (305) 274-0955.

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