Texas Lady Bird Deed Form

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Jeramie Fortenberry

Attorney (J.D., LL.M.)

How does a Texas ladybird deed form work?

A Texas ladybird deed form works by dividing ownership of the real estate into different time periods. The current owner has full, outright ownership of the property—called fee simple ownership—before signing the ladybird deed. Signing the deed divides the ownership into two legally distinct interests:

1. Life estate. The life estate gives the owner (the life tenant) lifetime ownership of the property.
2. Remainder interest. The remainder interest (or just remainder) is the right to possess the property at the current owner’s death.

A ladybird deed typically transfers the property from and to the same person. Specifically, a current owner with complete ownership transfers the property to himself or herself as a life tenant.

The person who signs the deed continues to own the property for life and can continue to use it just as before. A lady bird deed form also names one or more remainder beneficiaries who will inherit the property when the life tenant dies.

Can the owner still sell the property after recording a Texas lady bird deed form?

A lady bird deed form provides an enhanced benefit that makes it particularly attractive to Texas property owners. A life tenant under a traditional life estate deed cannot transfer complete ownership of the property without the remainder beneficiary’s consent. A Texas lady bird deed overcomes this limitation by reserving to the original owner enhanced powers over the property.

The original owner—who becomes the life tenant—keeps the right to sell, gift, mortgage, or lease the property without involving the remainder beneficiaries. The owner, while still living, also has the right to change his or her mind about the transfer.

What are the benefits of a Texas lady bird deed?

Texas lady bird deeds offer several key advantages over other deed forms that make them a valuable tool for Texas estate planning:

• Avoiding Texas probate. Texas lady bird deeds are designed to avoid probate. They do so by transferring the property to the remainder beneficiary automatically when the owner dies. The transfer is effective at the time of death, so Texas probate is not legally required. Bypassing probate avoids the delay, cost, and privacy concerns associated with the Texas probate process.
• Medicaid asset protection. Texas lady bird deeds can help to preserve Medicaid eligibility during the owner’s life. They can also avoid losing the property to the government’s Texas Medicaid Estate Recovery Program when the owner dies.
• Retained homestead exemption. A property transferred with a Texas lady bird deed keeps its Texas homestead protections because the owner who creates the deed retains full control over the property for life. The owner can continue benefitting from the favorable property tax treatment and asset-protection exemptions for Texas homesteads.
• Avoiding capital gains. A lady bird deed does not create a completed gift for federal tax purposes. The owner is treated as having retained the property until his or her death. The remainder beneficiary therefore receives a stepped-up basis—which permanently erases tax liability for increases in the property’s value before the original owner’s death. The stepped-up basis can result in a substantial income tax savings when the remainder beneficiary sells the property.
• Retained control. Texas lady bird deeds allow the owner to retain control over the property for life. Some types of estate-planning deeds—like traditional life estate deeds or survivorship deeds that create a right of survivorship with a new co-owner—cause the original owner to lose some control of the property. An owner who uses a lady bird deed has the flexibility to change the transfer without involving the remainder beneficiary. This avoids problems if new circumstances arise or the owner changes his or her mind about the transfer.
• Saving money. A Texas living trust can accomplish most benefits of a lady bird deed. But preparation of a Texas lady bird deed is usually less expensive than the cost of preparing a Texas will or living trust. This can result in substantial lifetime savings to the owner. The owner’s heirs or other beneficiaries may also save money because lady bird deeds reduce probate costs at the owner’s death.

How does a Texas lady bird deed form relate to other Texas deed forms?

The name lady bird deed deals solely with the probate avoidance feature of the deed. Other types of deeds are named after the warranty of title that they provide (or don’t provide). Warranty of title is a guarantee that a deed will transfer legally valid ownership free of liens, mortgages, or other adverse third-party interests in the property.³

Texas deeds named for their warranty of title include:

• Warranty deeds (which provide a complete warranty of title);
• Special warranty deeds (which provide a partial warranty that covers issues that arose while the person signing the deed owned the property);
• Deeds without warranty (which transfer real estate with no warranty of title); and
• Quitclaim deeds (which transfer with no warranty whatever interest the transferor has in the property).

Each of these deeds is named after the warranty of title it provides. A deed’s warranty of title is independent of its probate avoidance features (if any). So, more than one name might apply to the same deed. For example, a Texas quitclaim deed may also be a Texas lady bird deed.

What is the difference between a lady bird deed and a life estate deed?

A Texas life estate deed form is a traditional estate-planning deed upon which lady bird deeds are based. A traditional life estate deed is like a lady bird deed in that it separates the property’s ownership into:

• A life estate that gives the life tenant ownership for life; and
• A remainder interest that gives the remainder beneficiary ownership after the life tenant dies.

The difference is that a traditional life estate deed does not reserve to the owner the power to sell, convey, or mortgage the real estate during the owner’s life. A life tenant under a traditional life estate deed must protect the remainder beneficiary’s rights by doing nothing to impair or extinguish the remainder interest without the remainder beneficiary’s consent. That means the life tenant cannot sell, transfer, or mortgage the property unless the remainder beneficiary agrees. The life tenant can sell or transfer the life estate—i.e., the right to possess the property until the life tenant dies—but nothing more.

What is the difference between a Texas lady bird deed and a Texas transfer-on-death deed?

A Texas transfer-on-death deed form—commonly called a TOD deed—names a beneficiary who will automatically receive the property when the owner dies.⁴ Like a lady bird deed, a Texas TOD deed lets the owner keep the property for life and then transfer it outside of probate. Lady bird deeds and TOD deeds also both preserve the owner’s right to sell, transfer, or mortgage the property.⁵

An advantage of transfer-on-death deeds is that they are expressly authorized by Texas statute, while lady bird deeds are based on common law. The Texas Real Property Transfer on Death Act defines the rules, requirements, and legal effects of TOD deeds. Since that law was enacted in 2015, TOD deeds have become more popular than lady bird deeds. However, there are a few important differences that make lady bird deeds a better option in some scenarios:

• Warranty of title. A Texas TOD deed can never provide a warranty of title.⁶ A property owner can use a lady bird deed to retain the property for life, avoid probate, and provide a warranty of title to the new owner.
• Power of attorney. Only the owner himself or herself—not an agent under power of attorney—may sign a Texas transfer-on-death deed.⁷ An agent with the necessary authority can sign a lady bird deed for the property owner. This can be helpful if the property owner is not physically present to sign the deed or lacks the capacity to create a TOD deed.
• Additional life tenant. A Texas transfer-on-death keeps ownership with the current owner for life and then transfers the property when that owner dies.⁸ A property owner can use a Texas lady bird deed to also add a co-owner for life. For example, an individual owner could grant an enhanced life estate to the owner and his or her spouse, as life tenants, and name the owner’s children as remainder beneficiaries to take title at the death of the last surviving life tenant.

Can joint owners sign a Texas lady bird deed?

It is not uncommon for co-owners to create a Texas lady bird deed. The co-owners typically transfer the life estate to themselves—reserving to themselves the right to sell, transfer, or mortgage the property. The lady bird deed also names one or more remainder beneficiaries who have the right to the property when the last co-owner dies.

How can I create a Texas lady bird deed?

A lady bird deed is created by using a form includes language creating the enhanced life estate and meeting all Texas requirements that apply to other Texas deed forms.

Because the Texas lady bird deed form is not based on a statutory form, it is important to use a lady bird deed form that is customarily used in Texas real estate transactions. Real estate laws vary between states, so a lady bird deed created for Florida or Michigan, for example, may be invalid or unrecordable in Texas.

Lady bird deeds are regularly used in Texas and recognized by Texas title insurance companies, but they are not authorized by a specific statute. Texas attorneys have developed the form used for lady bird deeds to meet Texas title insurers’ requirements and Texas laws that govern all deeds. Like other Texas deeds, a lady bird deed must have proper formatting, an accurate legal description of the property, and the owner’s notarized signature.

1. In re Estate of Turner, No. 06-17-00071-CV (Tex. App. Dec. 8, 2017).
2. In re Estate of Turner, No. 06-17-00071-CV (Tex. App. Dec. 8, 2017).
3. See Tex. Prop. Code § 5.022.
4. Tex. Est. Code § 114.051.
5. Tex. Est. Code § 114.101.
6. Tex. Est. Code § 114.103(d).
7. Tex. Est. Code § 114.054(b).
8. Tex. Est. Code § 114.051.