Lady Bird Deed vs. Revocable Trust:

Which Is Better for Florida Estate Planning?

 

Both tools can help avoid probate, but they accomplish that objective in different ways. While a Lady Bird Deed may be sufficient in some situations, a Revocable Living Trust often provides broader planning opportunities.

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Understanding the differences can help you make an informed decision regarding your estate plan.

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WHAT IS A LADY BIRD DEED?

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A Lady Bird Deed, sometimes called an Enhanced Life Estate Deed, allows a property owner to:

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• Retain complete control of the property during life;

• Sell or mortgage the property without beneficiary consent;

• Change beneficiaries;

• Transfer ownership automatically at death.

 

The beneficiaries receive no ownership rights during the owner's lifetime.

 

Example

 

Susan owns a home in Florida.

 

She signs a Lady Bird Deed naming her two children as remainder beneficiaries.

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Susan may continue to:

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• Live in the home;

• Sell the home;

• Refinance the home;

• Change beneficiaries.

 

When Susan dies, ownership passes automatically to the children without probate.

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WHAT IS A REVOCABLE LIVING TRUST?

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A Revocable Living Trust is a legal arrangement that can hold:

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• Real estate;

• Bank accounts;

• Investment accounts;

• Business interests;

• Personal property.

 

The person creating the trust typically serves as Trustee during life and maintains control over trust assets.

 

Upon death or incapacity, a successor Trustee can manage and distribute assets according to the trust agreement.

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Similarities

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Both strategies can:

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Avoid Probate:  Property properly transferred through a Lady Bird Deed or owned by a trust may avoid probate administration.

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Preserve Control During Life:  The owner generally retains control of the property while living.

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Remain Revocable:  Both can typically be modified during the owner's lifetime.

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Key Differences

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Scope of Planning

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Lady Bird Deed:  only addresses the specific property described in the deed.

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Revocable Trust: can address an entire estate, including:

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• Real estate;

• Investments;

• Business interests;

• Personal property.

 

Incapacity Planning

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Lady Bird Deed:  Provides no management structure if the owner becomes incapacitated.

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Revocable Trust:  Allows a successor Trustee to manage trust assets during periods of incapacity.

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This is often one of the most significant advantages of a trust.

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Minor Beneficiaries

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Lady Bird Deed:  If a beneficiary is a minor, additional planning may be required.

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Revocable Trust:  The trust can continue managing assets until beneficiaries reach designated ages.

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Beneficiary Protection

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Lady Bird Deed:  The property generally passes outright to the beneficiaries.

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Revocable Trust:  The trust may provide:

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• Creditor protection;

• Divorce protection;

• Spendthrift protection;

• Asset management provisions.

 

Business Ownership

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Lady Bird Deed:  Cannot address LLC interests, corporations, or other business assets.

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Revocable Trust:  Can coordinate planning for business ownership and succession.

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EXAMPLE

When a Lady Bird Deed May Be Appropriate

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Mary is widowed.

 

Her primary asset is her Florida homestead.

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She has two responsible adult children.

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She wants the home to pass automatically at death and has no need for ongoing trusts.

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A Lady Bird Deed may accomplish her objectives efficiently.

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EXAMPLE

When a Revocable Trust May Be Better

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John and Sarah own:

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• Multiple real estate properties;

• Investment accounts;

• An LLC;

• Significant savings.

 

They want:

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• Probate avoidance;

• Incapacity planning;

• Protection for beneficiaries;

• Coordinated management of all assets.

 

A Revocable Living Trust may provide a more comprehensive solution.

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CAN YOU HAVE BOTH?

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Absolutely.

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In fact, many Florida estate plans include both a Revocable Trust and a Lady Bird Deed.

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Example

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A trust may own investment accounts and business interests.

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A Lady Bird Deed may be used for the homestead property.

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The appropriate strategy depends on the family's goals and circumstances.

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FLORIDA HOMESTEAD LAWS

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Florida homestead law introduces unique planning considerations.

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Factors that may affect planning include:

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• Marital status;

• Minor children;

• Creditor protection;

• Property tax exemptions;

• Constitutional restrictions on devise.

 

A strategy that works well for one family may be inappropriate for another.

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Proper analysis is important.

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COST CONSIDERATIONS

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A Lady Bird Deed is generally less expensive than a comprehensive trust-based estate plan. However, cost should not be the only factor considered.

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The relevant question is often:  Which tool best accomplishes your goals?

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A less expensive document may ultimately provide less protection and flexibility.

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WHICH OPTION IS RIGHT FOR YOU?

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There is no one-size-fits-all answer.

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A Lady Bird Deed may be appropriate when:

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✔      The primary objective is transferring a Florida home outside of probate.

✔      Beneficiaries are responsible adults.

✔      Asset protection and ongoing trust management are not major concerns.

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A Revocable Trust may be appropriate when:

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✔      Multiple assets are involved.

✔      Probate avoidance is desired for the entire estate.

✔      Incapacity planning is important.

✔      Beneficiary protection is a concern.

✔      Business interests need to be coordinated.