Real Estate

Question:    Why would someone convey property using a lady bird deed?

Answer:    There are multiple advantages of using a Lady Bird deed.  First, the transfer of the real property occurs pursuant to the remainder provision in the deed and will not require probate to effectuate the transfer.  Second, the owner/life tenant can maintain the homestead tax exemption.  Third, it gives the owner/life tenant greater control than with a typical life-estate deed.  The remainderman can be changed and a future conveyance or mortgage would not require the remainderman’s cooperation or approval.  Fourth, there are various tax advantages.  The remainderman receives the property at the life tenant’s death with a ‘stepped up basis’ for federal income tax purposes.  The Florida Department of Revenue does not levy documentary stamp taxes against Lady Bird deed transfers.  Finally, a Lady Bird deed can be useful in planning for Medicaid eligibility for an unmarried applicant because the creation of the deed is not considered to be a transfer of assets by the state.  Contact Board Certified Elder Lawyer Babette B. Bach, Esq. to find out if a Lady Bird deed would be appropriate for transferring interests in real property you own.

Question:    What is a ‘Lady Bird Deed’?  

Answer:    A Lady Bird deed, or “enhanced life estate deed,” is a method for transferring an interest in real estate.  With a Lady Bird deed, the owner of a property reserves a life estate in the property, entitling the grantor the right to live on the real property for the rest of his or her life.  The deed also identifies a ‘remainderman’, who, at the grantor’s death, receives title to the real property.  What makes Lady Bird deeds unique is that the grantor/owner/life tenant also reserves the right to encumber the property, keep all income from the property, and sell the property without the approval of the remainderman.  In short, the remainderman only get what’s left on the date of death of the property owner/life tenant.  This deed is designed to leave the owner with all the powers of a solely-owned parcel but with an automatic conveyance of whatever is left upon the owner’s death to the remainderman.  It can be a useful tool.

The Consumer Financial Protection Bureau is planning stronger disclosure requirements for reverse mortgages as more evidence emerges that senior citizens are using the product without fully understanding its main features and risks.

As part of a Dodd-Frank Act requirement, the agency was set to release a study showing  that signs reverse mortgages are not being used as intended, with increasingly younger borrowers taking out larger pots of money rather than gradual income streams to help finance their later years.

The bureau, which is required to study the reverse mortgage sector and identify potential consumer protection concerns, found that 73% of borrowers last year accessed nearly all or almost all of their home equity available in the reverse mortgage — an increase of 30 percentage points since 2008 — leaving few funds available later in life.

Nearly half of borrowers were younger than 70, and taking out a loan at the earliest eligibility (typically age 62) has become more common. The study found the biggest players in selling reverse mortgages currently are nonbanks, and the sector is “increasingly dominated by small originators.” The two largest providers, Wells Fargo and Bank of America, left the market last year and MetLife left it in April.

“It can be hard to tell a reverse mortgage is better than downsizing, refinancing or using a traditional home equity loan,” CFPB Director Richard Cordray said. “Even when a homeowner makes a careful decision to take out a reverse mortgage, it can be a challenge to select the right product and determine the appropriate amount to borrow initially.”

Consumers need to better understand reverse mortgage loans.  Additionally, consumers need to understand that this is an expensive product which is only recommended as a last resort.

If you need legal advice for reviewing a reverse mortgage, Medicaid planning, VA planning, tax planning, estate planning or trust and probate administration please contact our office for an initial consultation at (941) 906-1231.