The Difference Between Statutory Transfer On Death Deed & Lady Bird Deed

One of the most challenging things to deal with when a loved one passes away is deciding what to do with their property. Often, family members fight over who should or should not receive the title, and even if there is a Will, distributing the title can be a long and tedious process.

During your lifetime, you can set up a deed to automatically transfer title to real estate you own upon your death, eliminating this frustration for your family members and allowing you greater control over who receives what. There are two options available in Texas: a statutory transfer on death deed and a Lady Bird Deed (LBD). The distinction between these two deeds is subtle, but very important.

In the article and video below, we'll compare the differences between these deeds and break down the steps you need to take to draw one up for your estate.

What Is A Statutory Transfer On Death Deed

The state of Texas has approved a statutory form for a "transfer on death" deed. This deed allows the passage of real estate upon your death to your desired beneficiaries without the requirement of probate. The person setting up this transfer, called the grantor, retains a life estate in the property to have broad powers of management and ownership while still alive. Upon the death of the grantor, all that is needed to transfer title to the beneficiaries, or grantees, is the filing of an affidavit reflecting the grantor’s death, referring to the clerk's recording information, and stating that there are no outstanding debts of the estate.

The statutory form transfer on death deed, however, requires the consent of the beneficiaries to sell the property, mortgage the property, revocate the deed, or change the beneficiaries during the lifetime of the grantor. Sometimes, the beneficiaries are not willing to agree, and this can cause the grantor substantial problems if situations have changed since the deed was drawn up. 

What Is A “Lady Bird Deed”?

A “Lady Bird Deed” (LBD) takes the standard statutory transfer on death deed a bit further in the powers it retains for the grantor or transferor during his or her lifetime. The LBD is not a statutory form provided by Texas law, but it is recognized as an effective transfer-on-death instrument in the state of Texas.

The LBD allows the grantor to do virtually anything regarding the property during his or her lifetime without the consent of the beneficiaries. The LBD must contain the specific language authorizing the grantor to do these things without the participation of the beneficiaries. With the LBD, the grantor has the best of both worlds—the ability to manage the property fully during his or her lifetime as if the sole owner, but still transfer the property on death without probate.

The Benefits Of Both Forms Of These Deeds

Both the statutory transfer on death deed and the LBD offer benefits in addition to avoiding probate to transfer the property on the grantor’s death. These deeds can be a helpful tool for taking the full value of the real estate out of the determination of the grantor’s eligibility for Medicaid benefits. Only the value of the life estate in the property would be included in the calculation after one of these deeds has been drawn up and filed.

In addition, at least under current Texas law, the use of one of these deeds protects the real estate from the imposition of a Medicaid lien against the property upon the death of the grantor. If one of these deeds had not been used, and the property was still in the name of the Medicaid recipient at death, the property could be sold for the satisfaction of a Medicaid lien. Many times the Medicaid lien is so substantial that it wipes out the value of the property and the heirs are left with nothing. 

For a fuller discussion of the features and potential benefits of drawing up a transfer on death deed or “Lady Bird Deed,” please see this blog.

Don't Leave Your Estate's Future Up To "DIY"

Both of these deeds can help protect your wishes for the future of your real estate property while allowing you to make changes to your estate with some provisions. And both of them will require the assistance of a trusted, qualified estate planning attorney to properly draw up. Many people nowadays are turning to DIY or online estate planning templates to draw up their Wills, trusts, and other legal documents. This is not a wise decision and can cause your family more headaches in the long rim.

If you’re interested in discussing whether one of these deeds should be part of your estate planning package, please contact Adair M. Buckner to schedule a free initial consultation.*

Schedule A Free Consultation

*The free consultation does not cover actual review of documents or giving legal advice on a specific situation.

** This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, specific tax, legal, or accounting advice. We can only give specific advice upon consulting directly with you and reviewing your exact situation.