Lady Bird & Transfer on Death Deeds

Lady Bird deeds and transfer on death deeds (TODDs) are extremely useful but often overlooked estate planning tools available in Texas. These unique deeds provide simple ways to transfer real estate while retaining control and avoiding probate.

Lady Bird Deeds

A Lady Bird deed, also known as an enhanced life estate deed, is a deed that allows you to automatically transfer your real estate property to designated remainder beneficiaries when you pass away. It does this while allowing you to retain full control and ownership of the property during your lifetime. The deed grants you a revocable life estate in the property.

A Lady Bird deed allows the grantor additional flexibility. You can sell the property and keep the sale proceeds, mortgage the property, and change the designated remainder beneficiaries, all without needing approval from the beneficiaries.

Transfer on Death Deeds

A transfer on death deed (TODD) works similarly to a Lady Bird deed. It is a deed that allows you to transfer your interest in a real property to a designated beneficiary automatically upon your death. It transfers the property outside of probate.

A TODD is revocable, meaning as the transferor you can revoke the TODD anytime before your death. This is done by recording a new deed with the county or filing a cancellation form. The TODD beneficiary has no vested rights to the property and no say in its disposition until your death.

Key Benefits

The primary benefit of both Lady Bird deeds and TODDs is that the real estate property transfers seamlessly to your chosen beneficiaries when you die without needing to go through probate. The transfer happens automatically outside of court.

With both a Lady Bird deed and a TODD, you as the grantor/transferor retain a life estate interest in the property. This means you maintain full rights to use, possess, derive income from, and control the property during your lifetime.

Key Differences Between Lady Bird Deeds and TODDs

While Lady Bird deeds and TODDs accomplish similar goals, they have some important distinctions:

• A Lady Bird deed uses traditional grantor/grantee deed terminology, while a TODD uses “transferor/beneficiary” terminology.
• TODDs are authorized under a Texas statute, while Lady Bird deeds are a common law instrument without statutory provisions governing their operation.
• Lady Bird deeds allow grantors to sell or mortgage the property without needing approval from the remainder beneficiaries, while TODDs require recording revocation documents to change the beneficiary.
• TODDs offer more legal certainty regarding the rights of creditors, Medicaid eligibility, etc. A Lady Bird deed’s flexibility could lead to unintended consequences.
• A TODD beneficiary cannot vest their interest during the transferor’s life, while a Lady Bird deed may give remaindermen vested rights.
• TODDs require recording a cancellation form to revoke; a Lady Bird deed is revoked simply by selling the property before death.
• Statutory anti-lapse protections may apply to TODDs but likely do not apply to Lady Bird deeds.

Advantages of Lady Bird Deeds and TODDs

• Avoiding Probate
  • Both deeds allow avoiding probate because the property transfers automatically outside of court at your death.
• Retaining Lifetime Control
  • You keep full control and rights to the property during your life.
• Medicaid Planning
  • These deeds may allow qualifying for Medicaid while preserving your home, depending on factors.
• Avoiding Estate Recovery
  • Medicaid estate recovery may potentially be avoided for a primary residence.
• Asset Protection
  • The property is not subject to claims of beneficiaries’ creditors during your lifetime.
• Lower Costs
  • Deeds avoid some upfront costs compared to creating a living trust.
• Beneficiary Flexibility
  • More flexibility in changing beneficiaries than traditional deeds.
• Retaining Life Estate
  • Allows retaining a life estate while providing for transfer at death.

Potential Disadvantages of Lady Bird Deeds and TODDs

• Lack of flexibility of wills/trusts to address changed circumstances
• No statutory protections for Lady Bird deeds like those for TODDs
• Title company reluctance regarding Lady Bird deeds
• Beneficiaries take property subject to any liens/mortgages
• Could lose Medicaid eligibility if property not revoked in time
• Inflexibility if beneficiaries become disabled or die before you
• Creditors/ex-spouses may upend plans if deed terms not followed
• May lose control depending on how strictly title company handles the deed

The Takeaway

Lady Bird deeds and TODDs can provide simple yet powerful tools in Texas to avoid probate while retaining lifetime control, and seamlessly transferring property at death outside the court process. However, the differences between the two deeds and their potential advantages and disadvantages should be carefully weighed.

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Disclaimer:  The content of this website is for informational purposes only and should not be construed as legal advice and should not be acted upon without consulting a qualified probate attorney.

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