Transferring real property in Texas is accomplished by filing a signed and written document commonly known as a ‘deed’. It is a document that is signed by the person or persons who own the property (the Grantor) and who are selling or gifting real property to someone else (the Grantee). We are often asked, “Can you transfer real property to someone now but make it effective at the time of your death?” The answer is yes, but only if you are careful to follow the guidelines that Texas has set out. There are two types of deeds used most often for transfers of real property effective at the death of the property owner: a Ladybird Deed and a Transfer on Death Deed.
Typically, aging parents are interested in simplifying their estate planning process so that their children or heirs can minimize the expense and stress of going through the probate process. Sometimes, they may be trying to qualify for Medicaid to assist with the costs of nursing home care. In both situations, transferring the homestead or other real property to children or other family members can be accomplished using the Ladybird Deed or the Transfer on Death Deed. If structured properly, neither of these deeds will complete the transfer of title to the property until the property owner has died.
Enhanced Life Estate Deed or Lady Bird Deed:
A Lady Bird Deed, formally known as Enhanced Life Estate Deed, is usually used for keeping property in the family and protecting it from being sold for repayment of Medicaid benefits. Lady Bird Deeds include the following characteristics: (1) it can reserve the property owner’s right to sell the property to anyone during the lifetime of the property owner; (2) it allows the property owner to gift the property during his or her lifetime; and (3) the deed is treated as an ‘approved transfer’ for purposes of qualifying for Medicaid benefits – but only for the homestead. Lady Bird Deeds usually include warranty language for the title of the property. Title companies sometimes require the joinder of remainder beneficiaries under this type of deed if the property is sold during the property owner’s lifetime. This type of deed is not a ‘statutory deed’ but is recognized under common law in Texas.
Transfer on Death Deed:
A Transfer on Death Deed is very similar to the Lady Bird Deed but has some important differences. It must be filed in the deed records of county clerk’s office where the property is located before the property owner dies.Transfer on death deeds are subject to creditors’ liens. A beneficiary of this type of deed must survive the property owner by at least 120 hours. A Transfer on Death Deed never gives a warranty of title and cannot be executed by an agent using a power of attorney.
Before choosing which type of deed is right for your situation, always consult an attorney. Choosing the wrong type of transfer document can have unintended consequences and can make matters more rather than less complicated upon the death or incapacity of the property owner. It is important to remember that the strategic transferring of real property by deed is only a small portion of the estate planning process and typically a broader analysis is recommended. At MehaffyWeber, our experienced estate planning attorneys help clients determine the best plan to achieve their goals. Contact us today to speak to one our estate planning attorneys.