Many people seeking the best estate planning document to preserve their home for their family choose between a Lady Bird Deed, Transfer on Death Deed, Affidavit of Heirship, or Small Estate Affidavit. What are the differences and when would you use a Lady Bird Deed?
What is a Lady Bird Deed?
A Lady Bird Deed, formally called a General Warranty Deed Reserving an Extended Life Estate, transfers title to your home or other real property on your death free of probate, free of Medicaid Estate Recovery and free of claims by medical and other creditors. You can sign it. Your agent under a Durable [Financial] Power of Attorney can sign it.
Because title transfers on death, you remain the homeowner. Your property taxes do not change. You can still refinance your home. You can lease it. You can sell it. You can make a new deed, changing who will receive the house when you are gone. You can leave the house to a trust so that one person, the trustee, decides what to do with it.
When should you use a Lady Bird Deed?
This is also true of a Transfer on Death Deed. But a Transfer on Death Deed does not protect against claims by any creditor other than Medicaid. For the first two years after your death, a medical or other creditor could seek repayment from the sale of the home. A Transfer on Death Deed must be recorded before your death. Significantly, it cannot be signed by your agent under a Durable [Financial] Power of Attorney.
This last aspect in particular has led some people to prefer the Lady Bird Deed. A Lady Bird Deed can wait until you are receiving Medicaid home health or nursing home Medicaid. Why spend money on legal and recording fees if you do not need to?
But for some people, a Lady Bird Deed is, or should be, the estate planning document.
A Lady Bird Deed is, obviously, a deed.
People who leave a house, or a house and a car, or a house and a car and a bank account can avoid uncertainty and lower expenses. They can use a Lady Bird Deed for the house, DMV forms for the car, and a transfer-on-death designation for the bank account. This costs no more than an Affidavit of Heirship.
Affidavit of Heirship
Moreover, it eliminates the uncertainty associated with an Affidavit of Heirship. An Affidavit of Heirship must be signed before a notary by two witnesses who can testify to the marital and family history of the person who owned the home. There may be no one ready, able and willing to do so. This may be due to the homeowner’s age, because the homeowner moved around, or because the homeowner had a complicated history. An Affidavit of Heirship must be recorded in the county deed records. It has no legal effect until five years have passed with no one complaining that it is incorrect. Even then, it is only evidence, not proof, in a court proceeding to determine who are the heirs.
Small Estate Affidavit
A Small Estate Affidavit, which costs more than either a Lady Bird Deed or an Affidavit of Heirship, has its own uncertainties. In addition to the two witnesses, every heir must sign, promising to pay all the debts. Not only may some heirs be unwilling to sign, but the home might have to be sold to pay for Medicaid Estate Recovery or for other debts.
If even one heir is unwilling to sign the Small Estate Affidavit or one alleged heir objects to the Affidavit of Heirship, a court proceeding must be used to settle the estate. This is expensive.
For many people, the best way to preserve their home for their family is a Lady Bird Deed.
Elder law attorney, Terry Garrett, is a member of the National Academy of Elder Law Attorneys and is an Approved Guardianship Attorney. She assists people in elder law, estate and special needs planning, guardianship and settling estates. She graduated with honors from Cornell University. She was on the Dean’s List at Wharton Business School. She earned her J.D. at Columbia Law School, receiving the Parker Award and a Mellon Fellowship.