The story goes that the “Lady Bird Deed” or the Enhanced Life Estate Deed, was created by a Florida attorney who was looking for a good tool for his clients to avoid Medicaid claims on their properties. He gave an illustration in a paper of the enhanced life estate deed and arbitrarily named it after President Johnson’s wife.
A Lady Bird Deed has many similarities to a Transfer on Death Deed. With a Lady Bird Deed, the grantor is also deeding property that will vest in the beneficiaries at death, however the mechanism is a little different. In a Lady Bird Deed, the grantor deeds the property away while retaining a life estate along with the ability to revoke the deed or to sell the property. So, like a TODD, under a Lady Bird Deed, property passes at death to the beneficiaries (or transferees) and is not part of a person’s probate estate and avoids Medicaid Estate Recovery Program (MERP) in Texas.
One down side of a Lady Bird Deed is that, although the deed says that you can retain the right to sell the property, most title policy underwriters will require the beneficiaries to sign off before any sale.
There are several advantages of a Lady Bird Deed over a TODD. First, an agent under a Power of Attorney can sign a Lady Bird Deed (but not a TODD which has to be signed by the principal). This could be helpful if the principal no longer has the capacity to sign deeds. Second, a Lady Bird Deed might have better protection against creditors, as the law says that creditors of someone with a TODD have two years to go after the property. There is also an argument that title policies do not carry over to the beneficiaries under a TODD, but they do under a Lady Bird Deed. Finally, Lady Bird Deeds are more flexible in their terms than a TODD and may be better suited for more situations than a TODD.
I still tend to lean towards TODDs because of their ease to revoke and to sell and due to their strong statutory basis (Lady Bird Deeds are not statutory). However, depending on the circumstances of my clients, a Lady Bird Deed will sometimes be the better choice.