Dear Mr. Premack: My mom and dad had a Will that left their assets to me, my brother and my sister. Years later, they signed a Lady Bird Deed leaving their home to me and my sister only. It is filed with the courthouse. My brother has gotten his inheritance money and lived for free in their garage apartment for over 6 years. They paid his bills giving up their supplement insurance and nearly their medications to care for him. He did not want his name on the Lady Bird deed because of his felonies and the fact he has never paid taxes so the IRS would come after his part. He has no part as far as I’m concerned. His part was given to him while they were living. Does the Lady Bird Deed disqualify the Will?- ST
The phrase “Lady Bird deed” is an informal designation that is starting to be thrown around rather loosely. To be specific, it is a legal transfer of title in which the property owners transfer title to the house while retaining two rights: 1) the right to occupy the house via life estate, and 2) the right to unilaterally change their minds and reclaim or sell full ownership of the house.
Lady Bird deeds are also referred to as “enhanced life estate deeds” because an ordinary life estate deed does not include the right to reclaim ownership. Lady Bird deeds are most often used, under current Texas legal rules, to help avoid a claim from the Medicaid Estate Recovery Program.
In addition to being different from ordinary life estate deeds, Lady Bird deeds are different from regular warranty deeds. A warranty deed is a full conveyance of ownership that does not include either of the reserved rights (no right to reclaim title, and no right to occupy the house via life estate). Since you said your mother signed a Lady Bird deed, I’ll assume you are correct – but you should re-read the deed to be sure that you are calling it by the right name, and that it is not an ordinary life estate or a full warranty deed.
You also said your parents had “a Will that left their assets to me, my brother and my sister.” Are you forgetting to mention that they first left their assets to each other? When you father died, the Will probably left his share of the house to your mother. The children have no rights until both parents die. That would be consistent with the Lady Bird deed, in which they retained life estate until both of them die.
In the Lady Bird deed, they named only you and your sister as owners of the house, and left out your brother. You are concerned because the deed is not consistent with the Will. You wonder which dominates: the Will or the deed. The answer is: the deed dominates over the Will on condition that your mother does not exercise her retained right to reclaim ownership.
If she leaves the situation as-is, then when she dies you and your sister become full owners of the house by virtue of the Lady Bird deed. Title passes to you without probate and without reference to the Will. Your brother gets no part of the house.
However, if she exercises her retained right to reclaim ownership of the house (or your brother convinces her to exercise it) then the Lady Bird deed is canceled. Once canceled, the Will is restored to its role as the primary legal tool for determining ownership of the house. If the deed is cancelled before your mother dies, then your brother does inherit a 1/3 share of the house under the terms of the Will.
Paul Premack is a Certified Elder Law Attorney practicing estate planning and probate law in San Antonio.
Original Publication: San Antonio Express News, September 30, 2011