There are a nickel’s worth of states who recognize the ladybird deed. Texas, I am happy to report, is one of them.
But before I launch into my discussion, I need to give a trigger warning: this column contains legal terminology that may cause you to experience anxiety, light-headedness, and an inexplicable urge to step into your backyard and scream.
What is a Ladybird Deed?
The ladybird deed was originally created under common law, which means someone drafted the first one and then the courts refined the concept through their opinions. They are still refining.
The ladybird deed allows the grantor, who owns the real property, to transfer it to someone else while reserving certain rights. The person on the receiving end of the ladybird deed is called the grantee.
Under a ladybird deed, the grantor retains a life estate in the property. That means the grantor can continue to use the property during the grantor’s lifetime. The grantor also retains the right to sell, mortgage, gift, or otherwise dispose of all or part of the property. If the grantor chooses to exercise those rights, then the grantee receives nothing.
In other words, the grantor can give and then take away, and there is nothing the grantee can do about it. We, lawyers, explain it as follows: the ladybird deed vests the remainder interest in the grantee subject to divestment by the grantor. (That scintillating explanation is why we aren’t invited to many parties.)
Why is a Ladybird Deed Helpful?
A ladybird deed can be helpful for a lot of reasons. It can be used to avoid probate because the grantee owns the property once the grantor dies.
Medicaid Planning
It is often used for Medicaid planning purposes. Under Texas law, once a person dies the government can ask for reimbursement of the money it paid out under certain types of Medicaid. The government is limited to recovering only what was in that person’s probate estate. So, if the real property passes by a ladybird deed, it does not go into that person’s probate estate, and cannot be used to pay a Medicaid reimbursement claim.
Avoid an Affidavit of Heirship
It can be used to avoid filing an affidavit of heirship in the public record. The affidavit is a common way to show that title of land passed to the heirs when the grantor did not leave a will.
Flexibility
A ladybird deed can also contain a warranty of title. This provides flexibility to the grantor.
The Downsides of a Ladybird Deed
Not all is sunshine and birdsong with a ladybird deed. A married couple, for example, may run into difficulties if they both sign as grantors on a ladybird deed. In a 2023 opinion, husband and wife both signed as grantors on a ladybird deed regarding the family home and 10 acres. The grantee was a third person. Husband died. His will left everything to his wife. The wife, through her power of attorney agent, then signed a document revoking the ladybird deed.
The grantee argued that the wife couldn’t do that because he received the husband’s one-half interest in the property upon the husband’s death. The Court agreed, and the grantee ended up owning an undivided interest in the house and land.
Ladybird Deed vs. Transfer on Death Deed
A ladybird deed is different from a transfer on death deed, which only vests title in the grantee when the grantor dies. The grantee on the TOD deed must survive the grantor by 120 hours. The rules for the TOD deed are in the statutes.
Hammerle Finley Law Firm is Here to Help with the Ladybird Deed
There is a lot more to tell. Check with your attorney if you think a ladybird deed could be for you. Schedule a consultation with our team of expert attorneys if you need assistance navigating this unique deed.
Virginia Hammerle is an accredited estate planner and represents clients in estate planning, probate, guardianship, and contested litigation. She may be reached at legaltalktexas@hammerle.com. This blog contains general information only and does not constitute legal advice.
