Many consumers are surprised to learn that the real estate they own may be subject to probate upon their death.
Probate is the legal process by which your assets are administered and distributed by a probate court in accordance with your Will (or by applicable law if you have no Will).
The process is typically handled by what is called a personal representative, executor, or administrator, which is the person or company designated in the Will.
With the probate process, all assets that are part of the probate administration will be made public through court filings.
In addition, there are added costs associated with going through the probate process, which will diminish the amounts available to be distributed to the estate beneficiaries or heirs.
There are several ways for holding title to real estate that can be appropriate probate avoidance methods, which can include ownership through an entity, a trust, or a survivorship estate.
However, an often overlooked and simple technique is the use of a Lady Bird deed (also known as an enhanced or reserved life estate deed).
Side bar here: if you want to know the story behind the term “Lady Bird” use Google – story is interesting, but not the subject of this article.
With a Lady Bird deed, a person holds title to the real estate during their lifetime, and upon the death of that person, the entire remaining ownership (remainder interest) of the real estate will go to a designated person.
What makes the Lady Bird deed unique from a traditional life estate deed is that it reserves in the person holding the lifetime ownership interest the ability to transfer and sell the real estate during their lifetime and receive the sale proceeds.
This means that the person holding the real estate interest during their lifetime can dispose of the real estate at any time while living and terminate the remainder interest to the designated person.
Nonetheless, if the person holding the lifetime interest dies before terminating the remainder interest, the designated person holding the remainder interest automatically becomes the owner of the real estate without the need to go through the probate process.