Ladybird Deeds

By Adil Daudi, Esq. 

Avoiding probate is (or should be) a main objective of all estate plans.  By avoiding probate (a systematic distribution of assets, which is beyond our clients’ control) our clients have the power to determine how their assets will be distributed upon their death.  There are many tools available to accomplish this aim; one such tool is the ladybird deed.  It should be noted that ladybird deeds by themselves are insufficient to avoid probate; however, if used in conjunction with other probate avoiding tools, such as trusts and pour-over wills, our clients can successfully avoid probate.

What is a ladybird deed? 

To understand what a ladybird deed is, it is essential to know what a deed is.  A deed is a legal instrument that transfers an interest in real estate.  The most common type of deed is a “fee simple” deed.  A fee simple deed conveys property from Person A to Person B.  Once signed and delivered, Person B immediately becomes the owner of the real estate.  Unlike a fee simple deed, a ladybird deed does not immediately convey the property.  A ladybird deed conveys the property to another person but reserves ownership to the grantor (the person who conveys the property) for so long as the grantor is living.  For example, if Person A executed a ladybird deed to Person B, Person A would still own the property until Person A dies; at which point, Person B becomes the owner of the property. 

In addition to remaining the owner of the property until death, the grantor of a ladybird deed reserves the right to sell, mortgage, or transfer the property during their life.  So if Person A executed a ladybird deed to Person B, Person A could still sell the property or give it to someone else.  Ladybird deeds thus avoid probate by designating the person to whom the property will be distributed upon the grantor’s death.  If a ladybird deed (or other deed) is not in place, the property would be subject to probate. 

Ladybird deeds are not always the appropriate solution to avoid probate.  Choosing the wrong deed or using it at an inappropriate time may have significant negative consequences.  Moreover, there are many tax, Medicaid, and other implications associated with deeds; as such, qualified attorneys create each estate plan on a case-by-case basis based on the specific facts and situations of each client. 

Adil Daudi is an Attorney at Joseph, Kroll & Yagalla, P.C., focusing primarily on Asset Protection for Physicians, Physician Contracts, Estate Planning, Business Litigation, Corporate Formations, and Family Law. He can be contacted for any questions related to this article or other areas of law at adil@josephlaw.net or (517) 381-2663.

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