Lady Bird Deed vs quit claim deed in Florida

Lady Bird Deed vs Quit Claim Deeds: How to Pass on Real Estate in Florida

You probably know deeds are legal documents that transfer legal ownership of an asset from one party to another. However, you might not know that there are a myriad of deeds used in each state, each with different powers and limitations. The one you need depends on when and how you want to relinquish control of a property.

For example, quitclaim deeds and Lady Bird deeds are both used to transfer property in Florida. In general, a quitclaim deed renounces one’s ownership of a property, while a Lady Bird deed automatically passes property from a deceased owner to a beneficiary. It’s possible for a single deed to act as a Lady Bird and a quitclaim deed.

In this article, we explore the pros and cons of quitclaim deeds vs Lady Bird deeds and the many ways to share ownership—and pass on that ownership—of a home or property.

3 Ways to Share Ownership of a Property in Florida

Before we dive into quitclaims and lady bird deeds, it’s important to understand the ways in which property can be held. In Florida, there are three ways to share ownership of a property:

  • Joint Tenancy. This allows two or more people to own a property together, with equal rights to the property. If one owner dies, their portion automatically transfers to the surviving owner(s).
  • Tenancy in Common. This also allows multiple people to own a property together, but each owner has a separate, undivided interest in the property. Owners can have unequal shares and can sell or transfer their interests separately.
  • Tenancy by the Entirety. This is only for married couples in Florida. It gives each spouse an equal, undivided interest in the whole property. Creditors cannot attach the property to settle one spouse’s debt. If one spouse dies, the survivor gets the deceased’s interest.

What Is a Life Estate Deed?

A Life Estate Deed is a way for a current homeowner (the Grantor) to share ownership of the house with future owners (the remaindermen). The Grantor keeps their lifelong rights to live in and use the home, while the future owners listed on the deed gain ownership and rights to the property when the Grantor dies or moves out. 

A Life Estate Deed does not require a will, meaning the property does not go through probate. However, the Grantor cannot sell, rent, or mortgage the home, significantly reducing their control over the property.

What Is a Lady Bird Deed in Florida?

An Enhanced Life Estate Deed, sometimes called a Lady Bird Deed in Florida, takes this concept further.  In addition to full lifetime rights to occupy and control the property, the Grantor also retains the right to sell or take out loans against the property at any time. This provides more flexibility during life while still ensuring the home passes to the chosen beneficiary.

What Are the Advantages of Lady Bird Deeds?

In addition to retaining full lifetime rights over the property, a Lady Bird deed has numerous other benefits:

  • Tax advantages. A Lady Bird deed can provide a “step-up” in basis, meaning the fair market value of the property will be taken at the time of the Grantor’s death rather than when the home was purchased. If the remaindermen choose to sell the property, they will only be taxed on the appreciation from the time of death, potentially saving thousands in capital gains tax.
  • Spousal protection. For married couples, a Lady Bird deed can ensure a property passes to a spouse first, before any other beneficiaries. Provisions can be included to provide lifetime rights to a surviving spouse before transferring the property to ultimate beneficiaries.
  • Avoiding probate. A Lady Bird deed transfers the property immediately upon the grantor’s death, avoiding probate court. This speeds up the transfer process considerably and saves beneficiaries money in potential probate fees.
  • Revocability. Lady Bird deeds are revocable, giving grantors the flexibility to change their minds later if circumstances or relationships change. This ability to “undo” the Lady Bird deed provides security compared to an irrevocable transfer.
  • Ability to change beneficiaries. The Grantor can change the beneficiaries of the deed at any time by filing a new deed to redirect ownership. These designations are also immediate, giving Grantors peace of mind that the right person will inherit their property.
  • Benefit eligibility. With a Lady Bird deed, the property is still in the Grantor’s name, so it’s not subject to the five-year lookback period on large transfers. In addition, the state cannot place a lien on their property to recover long-term care costs if the Grantor ever needs Medicaid or public assistance. This protection from Medicaid estate recovery can preserve an inheritance that children or other beneficiaries would otherwise lose.

What Is a Florida Quit Claim Deed?

A quitclaim deed is a legal document used to transfer interest in a property from one party to another. Quitclaim deeds only transfer whatever ownership interest the Grantor currently has in the property, if any at all. The biggest concern with using a quitclaim deed is that it makes no guarantee that the person transferring the property actually owns it or has clear title.

In contrast, a warranty deed provides a higher level of protection to buyers. The Grantor in a Florida warranty deed is legally guaranteeing they hold clear title to a property and have the right to sell it. If any title problems arise later, the buyer can make a claim against the grantor for breach of warranty.

Warranty deeds are widely used in standard real estate transactions in Florida, while quitclaim deeds are commonly used between family members.

Do I Need a Quitclaim Deed?

Quitclaim deeds are commonly used between family members, divorcing spouses, heirs, or others who know and trust each other. They are faster and simpler to complete than warranty deeds. Common situations where Florida quitclaim deeds can be used include:

  • Property settlements. A quitclaim deed can remove an ex-spouse from a property title after divorce, transferring their interest to the other spouse.
  • Transferring property into a trust. The owner can quitclaim the property to name the trust as the new legal owner.
  • Gifting property to children or heirs. The owner can use a quitclaim deed to transfer their interest to beneficiaries.
  • Inheriting property from deceased relatives. Beneficiaries may be transferred interest via a quitclaim deed.
  • Selling a home. A quitclaim can transfer whatever interest the seller has if the seller has lost the original title.
  • Resolving title disputes. Quitclaims can clarify or transfer disputed interests between owners, or provide a record of the transfer if an original deed is missing.
  • Adding a new owner to a property title. An existing owner can use a quitclaim to add a new co-owner, such as a child or spouse.
  • Transferring business property. A private owner may quitclaim to retitle the property in the name of their LLC, corporation, or other business entity. Companies may also use quitclaim deeds when they change owners or sell assets.
  • Gift giving. Quitclaim deeds can be used to pass on an inheritance or give property as a gift during the Grantor’s lifetime.

Speak to a Florida Estate Planning Attorney Before Creating a Quitclaim or Lady Bird Deed

If you’re planning on transferring your property, you should always ask an estate planning attorney to look over your documents. These deeds must be executed and recorded by state law to ensure the property will be transferred as intended. Above all, you must be certain that your deed doesn’t contravene the instructions in your will.

Our legal team does more than draft documents—we ensure that all of the pieces of your estate plan work together. Email us at [email protected] today or schedule a 15-minute call to learn how we can help.