Lady Bird deed or quitclaim deed: protecting your Venice homestead

Many Florida homeowners want their home to pass to their children without probate. A common suggestion is to sign a quitclaim deed adding the children to the title. While that approach can avoid probate, it often creates problems that are difficult to reverse.

What a quitclaim deed to your children does

When you add your children to your deed, you give them a present ownership interest in your home. That transfer can have several consequences:

• It is generally treated as a gift for federal gift tax purposes, which may require a gift tax return.
• Your children may lose some or all of the step-up in income tax basis they would otherwise receive when they inherit the home. The step-up resets the home's tax value to its value at death, and losing it can increase the capital gains tax owed if they later sell.
• The home becomes exposed to your children's creditors, lawsuits, bankruptcies, and divorces.
• It can affect your Florida homestead exemption and your Save Our Homes assessment limitation.
• You can no longer sell, refinance, or change the deed without your children's signatures.

What a Lady Bird deed does instead

A Lady Bird deed, known formally as an enhanced life estate deed, allows you to name who will receive your home at your death while you keep complete control during your lifetime.

• You remain the owner and may sell, mortgage, or refinance the home without anyone's consent.
• You may change or revoke the named beneficiaries at any time.
• Your homestead exemption and Save Our Homes assessment limitation generally remain in place.
• The transfer is generally not a completed gift, and your beneficiaries generally receive a step-up in income tax basis.
• At your death, the home passes directly to your named beneficiaries without probate.

When a different approach is better

A Lady Bird deed is not the right choice in every situation. A revocable trust may be more appropriate for blended families, for owners of property in more than one state, or when you want to control how and when your beneficiaries receive the home. Property that is already owned jointly also deserves a careful review before any new deed is signed.

If you have already signed a quitclaim deed, it may still be possible to correct it, although doing so usually requires the cooperation of everyone who is now on the title. Attorney Season A. Chisholm can review your current deed and explain your options. The first step is a complimentary 15-minute call or in-person consultation.