A deed transfers the ownership of a real estate property from one entity to another. It contains the details of the property and the entities involved in the transaction. There are several different types of real estate deeds. While a quitclaim deed can be used across the country, a lady bird deed is only valid in some states, including Florida.
A lady bird deed is a type of quitclaim deed that is available in Florida. Both deed types are less formal compared to other deed types, such as warranty deeds. The quitclaim deed and the lady bird deed transfer only the seller's interest in a real estate property to the buyer. As such, they may not convey the entire ownership in the property. A quitclaim deed usually transfers property in the case of death, marriage or divorce. In contrast, a Florida homeowner often uses a lady bird deed specifically for estate planning purposes.
Both the quitclaim deed and the lady bird deed can allow homeowners to avoid probate when transferring properties to their heirs at death. However, with a quitclaim deed, the homeowner also has to establish a life estate interest to allow him to stay in the property for the rest of his life after transferring the deed to his heirs. With a lady bird deed, a Florida homeowner can convey the property to his heirs and stay in his home without setting up a separate life estate.
After transferring the deed to another entity, the homeowner using a quitclaim deed has limited rights, even if she has set up a life estate. The original homeowner needs her heirs to agree to a sale or a mortgage to conduct the transaction. The creditors of her heirs also can lay claim to the property. A lady bird deed allows the homeowner to retain much of her rights, including the right to sell, rent out or mortgage the property without the consent of her heirs.
Compared to a quitclaim deed, a lady bird title has several advantages when it comes to finances. If the heirs sell the property after the homeowner's death, they may not have to pay any capital gains tax on the sale proceeds. If the homeowner applies for Medicaid, there is a higher chance of him qualifying because the property with the lady bird deed does not count as an asset.