Q: I have a question about a property deed. We are getting up there in age, and we are trying to put everything in order for our kids. Is it better to have a Lady Bird deed or a life estate on our house? — Diane
A: There is no “best” way to plan for your entire estate or just a single property. Each family’s situation is different, so they must explore the best way for their circumstances.
Many planning tools, such as life estate deeds, living trusts, joint tenancy, and wills, might work best for your family. The main gist of estate planning is ensuring that your savings and assets go to your kids instead of your creditors when you pass away.
A secondary but important purpose is to make sure that the logistics of dealing with your estate are as easy and inexpensive as you can make it. When someone you love dies, you should spend your time with your family grieving and not having to deal with banks and lawyers.
A Lady Bird deed is a type of life estate deed also known as an enhanced life estate. The idea of both is similar: you deed your home back to yourself but designate who will become the owner when you pass away. The current owner becomes the “life tenant,” and the future owner is the “remainderman” who becomes the owner at the moment of the life tenant’s death by operation of law. No further action is needed to make this happen — it just does.
In a standard life estate, the remainderman is also considered an owner, and everyone must agree to sell or mortgage the house.
Simply put, you would need your kids’ permission to sell or mortgage your home. This can be useful for parents who are slowing down as it protects against unscrupulous people trying to take advantage of them.
Many people may not want to lose control of their home, which is where an enhanced life estate comes in. When you set up your life estate with a Lady Bird deed, your children will still get the property at the moment of your death.
The difference is that this type of ownership allows you to change your mind. If you decide to, you can sell your home, take out a mortgage loan or adjust who you leave your home to.