Even the most comprehensive plans can go awry. Estate planning involves making educated guesses about what might happen in the future. There are certain eventualities that are known, others that are expected, and then there are those that cannot be foreseen.
One area where discrepancies can arise is between transfers made in wills and Lady Bird Deeds. Some of these discrepancies fall into the category of things that are or should have been known or expected.
For example, consider a situation where a will leaves assets equally to children, but a Lady Bird Deed executed during the person’s lifetime leaves the real estate to one child. In such a case, the Lady Bird Deed would take precedence over the terms of the will.
One potential solution that spouses may have considered is the ability to revoke the deed during their lives to address any issues. However, questions can arise if one of the spouses passes away. Can the surviving spouse then revoke the lifetime deed after the first spouse dies?
Facts & Procedural History
This case involves a husband and wife who executed reciprocal wills. The wills left their entire estates to the surviving spouse.
Before the husband died, the couple transferred their real estate to the decedent’s son using a ladybird deed. The deed said that the couple could revoke the deed or sell the property during their lifetime. It did not say that upon the death of the first spouse that the property would pass to the second spouse.
A sibling and the surviving spouse exercised the right to revoke the ladybird deed. The son allegedly locked this sibling out of the house. This started the probate litigation as the sibling and surviving spouse filed a trespass action against the son.
The probate court found for the sibling and surviving spouse, concluding that the son did not have an interest in the property. This appeal followed.
About Ladybird Deeds
We have previously considered the nuances of ladybird deeds. These deeds can be very effective in transferring property without the need for probate.
A ladybird deed is often referred to as an enhanced life estate deed. The deed allows a property owner to retain control and ownership of the property during their lifetime while designating one or more beneficiaries to inherit the property automatically upon the grantor’s death. The grantor reserves the right to use, sell, or mortgage the property during their lifetime without obtaining the consent of the beneficiaries. The deed in this case did just that.
The main advantage of a ladybird deed is that it enables the property to pass directly to the designated beneficiaries without going through probate. Probate can be time-consuming, costly, and may delay the transfer of the property to the intended beneficiaries. With a ladybird deed, the transfer of ownership happens automatically upon the grantor’s death, bypassing the probate process for the property covered by the deed.
Ladybird Deed Becomes Irrevocable on Death of Spouse
The question, in this case, was whether the ladybird deed could be revoked after the husband died. The appeals court started with the fact that the real estate was community property. This means that the husband and wife each owned a one-half interest in the property.
The appeals court then examined the language of the deed itself. The deed did not provide any instructions on whether the property was to pass to the surviving spouse when the first spouse died. It also did not say that the first life estate interest terminated and then a new life estate interest started. The appeals court noted that the deed did not address these concepts at all.
Based on the language of the deed, the appeals court concluded that the one-half interest was vested and passed to the son when the husband died. This resulted in the son and surviving spouse being co-tenants as to the property. This in turn means that the son could not be held liable for trespass as he was a part owner of the property. Thus, the appeals court reversed the probate court’s decision.
The Takeaway
When a married couple executes a Lady Bird Deed in favor of their children, it is essential to carefully consider this issue. Specifically, the deed should explicitly specify the couple’s intentions for the property when the first spouse passes away. For instance, in this particular case, there were important instructions that were omitted from the deed, which the surviving spouse might have wanted to include:
- The deed should have included a clear instruction stating that the surviving spouse’s right to revoke the full transfer of the property remained valid even after the death of the first spouse. This provision would ensure that the surviving spouse retains the ability to make changes to the deed during their lifetime if necessary.
- Additionally, the deed could have stated that upon the death of the first spouse, the property passes to the surviving spouse, and the surviving spouse then grants a new life estate to the designated beneficiaries. This new life estate would be subject to the surviving spouse’s power to revoke the transfer, allowing them to maintain control over the property during their lifetime.
By addressing these critical points in the Lady Bird Deed, the married couple would have clarified their wishes and ensured that the property’s distribution aligns with their intentions. It is crucial to seek the assistance of an experienced estate planning attorney to ensure that all relevant instructions are properly included in the Lady Bird Deed, avoiding any potential complications or unintended consequences in their estate planning.
Do you need help with a probate matter in Houston or the surrounding area? We are Houston probate attorneys. We help clients navigate the probate process.
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Disclaimer
The content of this website is for informational purposes only and should not be construed as legal advice. The information presented may not apply to your situation and should not be acted upon without consulting a qualified probate attorney. We encourage you to seek the advice of a competent attorney with any legal questions you may have.
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