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Estate Planning

Estates

Public Interest

Probate

Differences Between Texas Transfer-on-Death Deed and Ladybird Deed

Differences Between Texas Transfer-on-Death Deed and Ladybird Deed

By:

Troy Moore

March 13, 2023

August 25, 2023

Differences Between Texas Transfer-on-Death Deed and Ladybird Deed

Introduction

Estate planning can be a complex and overwhelming process. However, with the right tools and knowledge, it can be a relatively straightforward process. Two estate planning tools that are gaining popularity in Texas are the transfer-on-death deed and the ladybird deed. In this blogpost, we will compare and contrast these two tools, providing insight into their differences and benefits.

Transfer-on-Death Deed

A transfer-on-death deed (TOD deed) is a document that allows an individual to transfer their property to a beneficiary upon their death, without the need for probate. It is also commonly known as a beneficiary deed or a revocable transfer-on-death deed.

One of the primary benefits of a TOD deed is that it allows for the transfer of real property without the need for probate. Probate is the legal process of administering a deceased person's estate, which can be time-consuming and expensive. By using a TOD deed, the property can pass to the designated beneficiary without the need for probate.

Another benefit of a TOD deed is that it is revocable. This means that the individual who created the TOD deed can change their mind and revoke the transfer at any time. This flexibility can be important if the individual's circumstances change.

Ladybird Deed

A ladybird deed, also known as an enhanced life estate deed, is a tool that allows an individual to retain control of their property during their lifetime while also providing for the transfer of the property to a designated beneficiary upon their death. The ladybird deed is named after Lady Bird Johnson, who purportedly used this type of deed to transfer property to her children.

One of the primary benefits of a ladybird deed is that it allows the individual to retain control of their property during their lifetime. This means that they can continue to use and benefit from the property, and they can sell, mortgage, or transfer the property to someone else if they choose to do so. However, upon their death, the property will pass directly to the designated beneficiary without the need for probate.

Another benefit of a ladybird deed is that it is flexible. The individual who creates the deed can change their mind and revoke the transfer at any time. Additionally, the ladybird deed allows for multiple beneficiaries, which can be beneficial if the individual wants to leave the property to more than one person.

Comparison

While both the TOD deed and the ladybird deed allow for the transfer of property without the need for probate, there are some key differences between the two tools.

 First, a TOD deed only allows for the transfer of property upon the individual's death. This means that the individual retains control of the property during their lifetime and can sell or mortgage the property as they choose. In contrast, a ladybird deed allows the individual to retain control of the property during their lifetime while also providing for the transfer of the property upon their death.

Second, a TOD deed only allows for the transfer of the property to one designated beneficiary. In contrast, a ladybird deed allows for multiple beneficiaries, which can be beneficial if the individual wants to leave the property to more than one person.

Title Company Issues and Transfer-on-Death Deeds

Some Texas title companies have taken an interesting position on Transfer-on-Death Deeds and potential creditors of the Estate.  Some title companies are now not wanting to issue title policies on homes where the conveyance or sale is being finalized less than two years after the date of death of the Decedent (i.e. the person who has passed away and transferred title to the house).  This has created an issue with some sales; the better practice would be to select your title company in advance and use a Texas title company that will not raise objections to the use of a Transfer-on-Death Deed.  This issue can wholly be avoided by utilizing the Ladybird Deed.  

 Conclusion

 In conclusion, both the TOD deed and the Ladybird deed are useful estate planning tools that can help individuals avoid probate and transfer property to their beneficiaries. However, they have some key differences, including when the property is transferred and the number of beneficiaries allowed. Therefore, it is important for individuals to carefully consider their estate planning goals and consult with an experienced estate planning attorney before deciding which tool is right for them.  Different estate planning products have different benefits and limitations.  We can help you sort through which scenario fits your family best.  Call or click today to schedule your Peach of Mind Planning Session today!

Differences Between Texas Transfer-on-Death Deed and Ladybird Deed

March 13, 2023

August 25, 2023

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