Most recorded real estate deeds are irrevocable. There is, however, one kind of deed that is revocable – the enhanced life estate deed, or more commonly known as the “Lady Bird Deed.”
The traditional life estate deed gives the life tenant a life estate in the property and the remainderman a remainder interest. The enhanced life estate deed also gives the life tenant a life estate in the property, but the remainderman only gets a possible remainder interest. The lady bird life tenant can maintain complete control of the property during his or her lifetime. Unlike the traditional life estate deed, the remainderman of a lady bird deed does not become vested until the death of the life tenant.
The life tenant under a lady bird deed can sell, mortgage, and keep full control of the property without the consent of anyone else. Conversely, with the traditional life estate structure, the remainderman would have to join in or consent to the sale or mortgage of the property. Further, without the cooperation of the remainderman, the life tenant in a traditional life estate set-up would not be able to sell or mortgage the real property.
An important benefit of both the traditional life estate deed and the lady bird deed is that the real property involved does not have to be probated. The life estate expires upon the life tenant’s death, and the beneficiary of the remainder interest becomes the immediate owner of the property at the same time.
Having the authority to sell real property is important when it comes to real estate. If the property is owned by an estate, waiting for the probate court to give its approval or to issue an order can significantly delay a closing. Additionally, waiting for a three-month creditor period to expire can also cause delay. On the other hand, in general, the remainderman of a life estate deed does not need a court order to sell or enjoy full ownership of the property.
A lady bird deed is the best of both of worlds. It gives the life tenant complete control of the property during his or her lifetime, and passes any remainder interest automatically to the named beneficiary, without requiring probate or court intervention. Using a lady bird deed as a planning technique allows you to give your children your home in the future when you pass away, while you still retain full control of it while you are alive.