As a Florida estate planning attorney, you may often encounter clients with complex financial and property arrangements. One common question is whether a Lady Bird Deed, also known as an enhanced life estate deed, can be used on a property with a reverse mortgage. The short answer is yes, but there are several important considerations and steps involved.
Understanding Lady Bird Deeds and Reverse Mortgages
Lady Bird Deed Benefits
A Lady Bird Deed allows the property owner to retain control over their property during their lifetime while automatically transferring ownership to designated beneficiaries upon their death. This type of deed is often used in estate planning for its benefits, such as avoiding probate and providing Medicaid planning advantages.
Reverse Mortgage Basics
A reverse mortgage, typically available to homeowners aged 62 and older, allows them to convert part of their home equity into cash without selling the home. The loan becomes due and payable when the homeowner passes away, sells the property, or moves out permanently.
Combining Lady Bird Deeds and Reverse Mortgages
Approval from the Lender
The first step in utilizing a Lady Bird Deed with a reverse mortgage is obtaining approval from the reverse mortgage lender. Most reverse mortgage agreements require lender consent for any changes to the property title.
Due-on-Sale Clause
Reverse mortgage agreements typically include a due-on-sale clause. This clause states that the loan becomes due if the property is transferred. However, because a Lady Bird Deed does not transfer ownership until the homeowner’s death, it usually does not trigger the due-on-sale clause.
Medicaid Planning
For clients using a Lady Bird Deed for Medicaid planning, it’s important to note that a reverse mortgage could complicate this strategy. Consulting with an experienced Florida estate planning attorney can help navigate these complexities.
Steps to Create a Lady Bird Deed with a Reverse Mortgage
- Consult with the Lender: Discuss the intention to execute a Lady Bird Deed with the reverse mortgage lender and obtain their approval.
- Seek Legal Advice: Engage with an attorney who specializes in both elder law and real estate law to ensure compliance with the reverse mortgage terms and state laws.
- Prepare the Deed: Have the attorney draft the Lady Bird Deed, including all necessary legal language.
- Record the Deed: Sign and record the Lady Bird Deed in the county where the property is located.
Final Thoughts
Combining a Lady Bird Deed with a reverse mortgage in Florida can be a viable option for estate planning, but it requires careful consideration and professional guidance. By consulting with both the reverse mortgage lender and an experienced Florida estate planning attorney, you can help ensure that your clients’ objectives are met without violating any loan terms.
Lori Vella is an Estate Planning and Business Attorney. She works virtually throughout Florida and New York, but has her home office in Tampa, Florida. She is mom to a little boy which ignited the passion for helping other families. She and her son enjoy car rides, playgrounds and taking mini-adventures. They also have an organic garden that surprisingly yields vegetables. Lori considers herself well-versed in Seinfeld and welcomes any trivia!
Disclaimer: The Law Office of Lori Vella’s website contains general information directed to Florida residents. This firm does not intend to give legal advice through its pages and/or blog. If you need legal advice, we encourage you to find an attorney licensed in your state. This language on this website does not create an attorney-client relationship between you and this firm.