The Differences: a Transfer on Death Deed and a Lady Bird Deed

When it comes to estate planning in Texas, there are various legal instruments available to ensure the smooth transfer of property upon death. Two popular options are the Transfer on Death Deed (TODD) and the Lady Bird Deed. While both serve the purpose of avoiding probate, they differ in significant ways. In this blog post, we will explore the key differences between these two deeds to help you make an informed decision about which option best suits your estate planning needs.

Transfer on Death Deed (TODD): A Transfer on Death Deed, also known as a beneficiary deed or a TODD deed, is a legal document that allows a property owner to designate a beneficiary who will inherit the property upon their death. Here are some important points to consider:

1. Probate Avoidance: A TODD allows the property to transfer to the designated beneficiary without the need for probate. This can help streamline the transfer process and save time and expenses associated with probate proceedings.
2. Revocable: The property owner retains full control over the property during their lifetime and can revoke or change the beneficiary designation at any time.
3. No Immediate Ownership: The beneficiary named in a TODD has no legal rights or ownership interests in the property until the owner’s death. They only acquire ownership rights after the owner passes away.
4. Tax Implications: The transfer of property through a TODD does not trigger a taxable event for the recipient. However, the property may be subject to estate taxes upon the owner’s death.

Lady Bird Deed: A Lady Bird Deed, also known as an enhanced life estate deed, is another popular option for property owners in Texas. Here’s what you need to know about this unique type of deed:

1. Retained Control: With a Lady Bird Deed, the property owner retains complete control over the property during their lifetime. They can sell, mortgage, or even revoke the deed without the consent of the beneficiaries.
2. Avoiding Probate: Similar to a TODD, a Lady Bird Deed allows for the transfer of property outside of the probate process, bypassing the need for court involvement.
3. Reserved Rights: One distinguishing feature of the Lady Bird Deed is the ability of the property owner to retain specific rights, such as the right to receive rental income or the right to change beneficiaries during their lifetime.
4. Medicaid Planning: Lady Bird Deeds are often utilized in Medicaid planning strategies, as the property does not count as an asset for Medicaid eligibility purposes during the property owner’s lifetime.

Conclusion: Both the Transfer on Death Deed (TODD) and the Lady Bird Deed offer effective methods to transfer property in Texas while avoiding probate. The decision between the two depends on your specific circumstances and objectives. If you desire complete control over the property during your lifetime and wish to reserve certain rights, the Lady Bird Deed may be the better option. On the other hand, if you prioritize a straightforward transfer without immediate ownership for the beneficiary, the Transfer on Death Deed might be more suitable.

It is important to consult with an experienced Texas attorney who specializes in estate planning to determine the most appropriate deed for your unique situation. They can guide you through the process, ensure your documents are properly executed, and help you achieve your estate planning goals.  Contact The Woodlands Law Firm today!