Enhanced Life Estate Deed a/k/a Lady Bird Deed

One of my clients is an elderly widow. She recently contacted me with several concerns about her estate. Her primary concern was that she wanted to keep her home out of probate when she passes away. Like most people, she doesn't like the idea of her property being tied up in legal limbo for months before her beneficiaries (i.e. her daughter and two sons) take possession of the home. She was advised by another attorney to set up a trust, put her home (her only asset of real monetary value) into the trust and then manage the trust until she passes away. She brought the matter to me as she does with all of her legal concerns. I advised her that a simpler way for her to handle the matter might be to execute an "Enhanced Life Estate Deed" also known as the "Lady Bird Deed" (named in honor of former First Lady, Ladybird Johnson) or a "Transfer on Death Deed."

What is an Enhanced Life Estate Deed?
An Enhanced Life Estate Deed is a document that would deed my client's home to her children but reserve for my client a life estate coupled with the ability to sell the property at any time. This is called an "Enhanced Life Estate." In layman's terms, this means that (1) my client still owns the property; (2) my client can sell the property at any time without notifying her beneficiaries; and (3) if my client never sells the property, the house will pass directly to her beneficiaries after she passes away without going through probate.

Florida, Texas, Ohio, California, Kansas and several other states now accept this form of conveyance. In these states it is a recommended alternative to the traditional life estate deed. Of course, where a life estate can result in unwanted capital gains taxation, it should not be used, and other forms of planning should be considered (such as a living trust).

Lady Bird Deed v. Quitclaim Deed
In the past, people have used a Quitclaim Deed in an attempt to avoid probate. The Quitclaim Deed was supposed to make things easier for beneficiaries. A Quitclaim Deed deeds property to one's children while the parent retains a life estate interest. The problem with the Quitclaim Deed is that my client would not be able to sell or encumber (e.g., mortgage) her property without the consent of her beneficiaries.

Further, creditors of my client's beneficiaries could obtain an enforceable lien against her home because the beneficiaries could not claim the home as homestead property. Also, spouses of my client's beneficiaries could claim an interest in the property, either upon their husband's death or in the event of a divorce.

The Enhanced Life Estate Deed does not share the above pitfalls. For more information about the difference between the Enhanced Life Estate Deed, Warranty Deed and Quitclaim Deed read my article here.

Other Benefits to a Lady Bird Deed
The Enhanced Life Estate Deed has several other benefits including:
(1) bypassing probate;
(2) it does not result in capital gains for the beneficiaries because they will not receive any value until my client passes away. When she passes away, her beneficiaries take the home at a "stepped-up basis" - not my client's original basis. A "stepped-up" basis is the value of the property on the day of my client's death;
(3) it does not open up the property to the beneficiaries' creditors during my client's lifetime because the beneficiaries have no interest until my client has passed away without selling the home;
(4) it allows my client to sell her home at any time, compared to a regular life estate where she would not be legally entitled to sell her home.

Language Creating the Deed
Attorney's Title Insurance Fund has recognized certain specific language that must be included to validate an Enhanced Life Estate Deed. Without the specific language the deed will be declared invalid for transferring the real estate in the manner outlined above. I charge my clients $450.00 to prepare and record the deed.

You can purchase My ENHANCED LIFE ESTATE DEED/LADY BIRD DEED TEMPLATE Here for $29.99.

Divorce: Arizona Divorce Proceedings

I have a friend who moved his family (consisting of his wife and two elementary school age children) to Arizona in January of last year. He did so over his wife’s objections to leaving her extended family. About two months after moving to Arizona his wife grew too homesick to stay any longer. One day while my friend was at work, his wife packed her bags, loaded up her car and moved herself and their children back to Florida. Within a week after his wife left him, my friend decided to file for divorce.

Although I am not licensed to practice in Arizona, my friend contacted me about how to go about filing for divorce. His first question concerned whether he could legally file for divorce in Arizona when his wife and children now lived in Florida. His second question dealt with grounds for the divorce. Specifically, whether his wife leaving him for a little over a week and telling him that she would not return constituted grounds for divorce. His third question was whether he was required to obtain an attorney to represent him in his Arizona divorce proceeding.

Arizona Divorce: Residential Time Limits
The answer to his first question could be found with a simple appeal to the Arizona Divorce Statute. In Arizona, either spouse must have lived in Arizona for at least ninety (90) days prior to filing for divorce. This meant my friend would have to either file in Florida or wait an additional three (3) weeks before filing.

Arizona Divorce: Grounds for Divorce
Unlike some states, Arizona does not require that one of the spouses prove blame or responsibility in order to end the marriage unless the marriage is a “covenant marriage.” Instead, the court is simply required to answer in the affirmative the question of whether the marriage is "irretrievably broken." “Irretrievably broken” means the parties have differences or disputes that cannot be settled which are so serious that they have caused the marriage to totally and completely break down.

As my friend did not have a “covenant marriage” this post does not address that type of marriage. Suffice it to say that Arizona divorce law prohibits a court from granting a divorce after such a marriage unless one of the parties can prove adultery, abandonment, physical abuse or regular substance abuse or both spouses agree that the marriage should end. A “covenant marriage” is a marriage where both parties agree to limit grounds for divorce prior to their getting married.

Arizona Divorce: Self Representation
Arizona did not require that my friend obtain an attorney to file his divorce papers. However, I advised him that in addition to being without the benefit of an experienced attorney to guide him through the process, he would be required to abide by the same statutes, rules and procedures as an attorney would. This includes the proper and timely filing of legal documents, observing proper courtroom decorum and having at least a working knowledge of the divorce process. In the end, he chose to retain an Arizona divorce lawyer.

Another legal fact of interest is that in Arizona the court cannot grant a divorce until at least sixty (60) days after the other spouse is first served with the original court papers.

Enhanced Life Estate Deed Revisited

Click on the Picture below to read my article on the Enhanced Life Estate Deed/Lady Bird Deed. You can also purchase the Enhanced Life Estate Deed/Lady Bird Deed Here.