Texas property owners can transfer an interest in real estate to a beneficiary by using a Lady Bird Deed. However, in 2015, the State Legislature enacted laws that created another option for property owners to transfer an interest in real estate to a beneficiary. The Transfer on Death Deed is similar to a POD (paid on death) account with a bank. When the grantor dies, the interest in the property transfers to the named beneficiary or beneficiaries. By avoiding probate, the beneficiary can avoid gift taxes. In addition, both deeds are effective instruments in Medicaid planning.
However, using either of these deeds is not a substitute for comprehensive estate planning. One of the deeds may be one of several estate planning tools you can use to protect your property and provide for loved ones. Our Texas estate planning lawyers can help you decide which deed is a tool you should consider using as part of your estate plan.
The Important Differences Between a Transfer on Death Deed and a Lady Bird Deed in Texas
Both a Lady Bird Deed and a Transfer on Death deed convey real estate outside of probate and can avoid real estate recovery in a Medicaid claim. However, there are a few significant differences between the two estate planning tools that you should be aware of when deciding which option is best for your situation.
A Lady Bird Deed or an Enhanced Life Estate Deed allows the owner of the real estate to transfer the property upon death to another person. However, during his or her lifetime, the grantor retains the right to reside on the property. The grantor also retains the right to lease, mortgage, or sell the property and retain any proceeds generated from the property. If a grantor wishes to terminate the transfer of the remaining interest in the property to the beneficiary, he can do so at any time.
A person acting as Power of Attorney for the property owner can sign a Lady Bird Deed. This important distinction makes the Lady Bird Deed the preferred method of transferring the remaining interest in real property to another person outside of probate if the owner lacks the mental capacity to sign a deed.
The Transfer on Death Deed has the same benefits of the Lady Bird Deed with three very important exceptions:
- The interest conveyed in the property by Transfer on Death Deed is subject to the claims filed against the probate estate for two years after the death of the grantor.
- Another person cannot execute a Transfer on Death Deed under a Power of Attorney.
- The beneficiary of the Transfer on Death Deed must survive the grantor by 120 hours to receive the interest in the property. If the beneficiary predeceases the grantor or dies simultaneously with the grantor, the interest in the property passes through the grantor’s estate.
Consult a Texas Estate Planning Attorney for More Information
A Transfer on Death Deed must be executed and recorded in strict compliance with the requirements of the statute. The Lady Bird Deed must also contain certain language and elements to be effective and valid. To avoid problems, you need an experienced estate planning lawyer to guide you through the process.
Each situation is unique; so it is important to review your circumstances and options with a Texas estate planning lawyer. You may benefit more by using one deed instead of the other deed to transfer an interest in the property. Contact the Texas estate planning lawyers at the Law Office of Carey Thompson today to discuss the option that is right for you.