Welcome to the Kazi Law Firm! We are a boutique law firm steeped in Texas tradition personifying the warmth and congeniality consistent with southern hospitality. We believe in preserving integrity and professionalism with true Texan charm, staying true to our roots, while providing essential, affordable legal services to all. Located just north of Dallas, Texas in the rapidly growing suburb of Frisco; the Kazi Law Firm concentrates on contracts drafting and review, immigration law, will & estates, real estate law, landlord, tenant, mediation, and general business law needs.
Have you heard of a “Lady Bird Deed” in Texas? You may not be familiar with this term as it is named after Lady Bird Johnson, the late First wife of our 36th President of the United States, Lyndon B. Johnson. This type of deed is also known as a transfer on death deed (TODD) or an enhanced life estate deed.
What is a Lady Bird Deed in Texas?
A Lady Bird deed creates a general lifetime power of appointment and names a default beneficiary to receive property upon the death of the owner. There are several benefits and drawbacks to this type of deed. Using a Lady Bird deed allows an owner to retain control of property during his or her lifetime and pass ownership to persons of his choice upon his death, outside of probate. It can be used as a simple, inexpensive estate plan for persons whose residence is the major or only asset that may need to be probated upon death. After the owner’s death, the default beneficiary only has to record the death certificate and file a Property Transfer Affidavit with the local assessor.
Benefits of a Lady Bird Deed
- Continued Control: This allows for the original owner to change their mind, make changes to, and alter or sell their property without any sort of involvement from their beneficiary. Essentially, while the original owner is still alive, the beneficiaries have no say in what goes on with the assets. The original owner retains full control over the property.
- Avoiding Probate: This deed helps you and your family avoid probate by automatically transferring the property to the designated beneficiary upon the death of the original owner.
- Tax Benefits: Due to the way that the assets are classified through the usage of a Lady Bird deed, anything left to a family member is termed an “incomplete gift” for tax purposes. This classification is crucial because of the incomplete status, these assets do not have any gift tax associated with them. Therefore, there’s no need for the beneficiary to file a gift tax return.
Drawbacks of a Lady Bird Deed
- Less Flexibility: This type of deed sets up a less flexible arrangement than a trust. It typically makes no provision for descendants of a default beneficiary who predeceases the donee/grantee.
- Not One Size Fits All: The Lady Bird deed is not a preferred solution in certain situations, such as when an owner is likely to die leaving a sizable unpaid lien on the property. It is inadvisable where an owner wishes to leave the property to multiple (more than 2 or 3) default beneficiaries, particularly if they do not get along, as they will be required to work together to sell or dispose of the property.
Nursing Home Care
We are often asked by clients how this type of deed will affect their ability to receive Medicaid and more specifically what if nursing home care is required. During a grantor’s stay in a nursing home on Medicaid, a Lady Bird deed is helpful to preserve their residence as an exempt asset under Medicaid eligibility rules, and as an inheritable asset that (under present law) avoids a Medicaid estate recovery lien. However, the nursing home resident’s income must be used to pay their care costs, so it will not be available to settle the upkeep and maintenance expenses for the residence.
As you can see there are advantages and disadvantages of using a Lady Bird Deed in Texas. I recommend consulting with a qualified attorney to determine if this is the right estate planning tool for you.
I built my law practice on the premise of being a life raft in a sea of sharks. I want to be an advocate for those that have been wronged and are too intimidated to seek help. My firm is here to explore your options, guide you through your legal journey, and give you that safe space to ask questions! There’s no such thing as a stupid question…Only the ones you don’t ask. So, my question to my clients is not “do you have any questions?” But rather “what questions do you have?”
As always, the Kazi Law Firm is standing by to help you in your time of need. Don’t hesitate to contact us today. We specialize in real estate law, landlord-tenant disputes, immigration, and wills & estate planning. Family is at the core of our practice. Just as we treat our family with respect and understanding, we treat yours. Come join the Kazi Law Firm family today!
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