Lady Bird deeds

Estate Planning · Deeds

You keep everything, and it still passes automatically.

An enhanced life estate deed — the Lady Bird deed — transfers a remainder interest in real property to named beneficiaries while reserving to you a life estate plus the unrestricted right to sell, mortgage, lease or give the property away without their consent. On death, title passes to the beneficiaries by operation of the deed rather than through probate. Until then, nothing about your ownership has changed.

Why it is used

• The house passes without a probate proceeding for that asset.
• You retain complete control: no beneficiary signature is needed to sell or refinance, and their creditors and divorces do not attach to your home.
• It is revocable — you can change the beneficiaries or undo it entirely.
• Your homestead exemption and over-65 tax treatment are preserved.
• It is generally treated as avoiding Medicaid estate recovery against the property, which is one of the main reasons families in Texas use it.
• Beneficiaries ordinarily receive a stepped-up basis at death, unlike an outright lifetime gift of the house.

Where it goes wrong

It is a deed, and deeds are unforgiving. A defective legal description, an unrecorded instrument, a beneficiary who dies before you with no provision for what happens next, or a deed that conflicts with the will all create problems that surface exactly when the family cannot fix them. It also does nothing about a mortgage, and it does not replace a will — it handles one asset.

Compared with the alternatives

A transfer on death deed is a similar Texas tool with different formalities and different consequences. Adding a child to the title as a joint owner — the most common do-it-yourself approach — is usually the worst option available: it exposes the house to that child's creditors and divorce, requires their consent to sell, and can create a gift tax issue and a poor basis outcome. We look at the whole picture before recommending any of them.

Common questions